SOL, the native token that powers the Solana blockchain, is trading in subdued fashion near $13.50 on Friday. The cryptocurrency, while still up over 20% from last month’s lows around $11 per token, has now waned about 10% from last week’s highs near $15. For now, Solana’s 21-Day Moving Average at $13.60 seems to be acting as a magnet.

SOL/USD consolidates near its 21DMA. Source: TradingView

Solana Still Struggling Post-FTX Collapse

Solana has been a big underperformer in the cryptocurrency space since early November. Last month, the cryptocurrency slumped over 56% in wake of the abrupt collapse of cryptocurrency exchange FTX and its sister hedge fund Alameda Research. Sam Bankman-Fried, the CEO of both companies, had been a prominent backer of Solana.

At current levels, SOL trades around 65% lower versus its pre-FTX collapse highs. Solana had formerly ranked in the top 10 cryptocurrencies by market capitalization. It now ranks 16th, with the total circulating SOL supply currently worth under $5 billion.

According to a recent report by Solana staking service Solana Compass, the liquidators of Alameda Research now control 13.25% of total circulating SOL supply. Alameda Research has said these tokens might not be able to be sold until the hedge fund’s bankruptcy proceedings are complete, which could take up to 10 years. That means that these tokens are unlikely to contribute to sell pressure any time soon.

But SOL has nonetheless taken a battering. FTX and Alameda had been big sources of financial support for the Solana Foundation, which is the company tasked with the development of the Solana blockchain and ecosystem. And the ecosystem is not looking healthy right now.

Solana DeFi Ecosystem Experiences Capital Flight

According to DeFi Llama, Solana has lost over 70% of its smart-control total value locked (TVL). Essentially, the FTX debacle has triggered a capital flight out of the Solana Decentralized Finance (DeFi) ecosystem. These funds seem to have mostly left crypto in their entirety, with dominant DeFi players like Ethereum losing 21% of their TVL over the same time period. At the time of writing, the Solana ecosystem’s net TVL is a little under $500 million, versus still more than $40 billion on Ethereum.

Solana DeFi TVL
Solana’s DeFi TVL has dropped sharply since FTX’s downfall. Source: DeFi Llama

Negative SOL Funding Rate Suggests Markets Still Bearish

Negative SOL funding rates, as per Coinglass data suggest that the market is still leaning bearish toward SOL. Negative funding rates suggest elevated demand for short positions, which manifests itself as short traders paying funding to long traders.

Solana funding rate
Solana’s funding rate has been negative since FTX’s collapse. Source: Coinglass

Solana Daily Active Users Hits Yearly Low

While the drop off in daily active users (DAUs) hasn’t been as sharp as the decline in Solana’s DeFi TVL, it is notable that in wake of the recent FTX collapse, Solana’s DAU has hit a new low for the year in recent days. As of 1 December, the number of Solana DAUs was around 388K, around 100K lower than it was at the start of November. The number of DAUs has thus slipped back to roughly in line with its mid-2021 levels.

Solana DAUs
Solana DAUs recently hit a new yearly low. Source: Hellomoon

Will SOL Recovery From Its FTX Association?

Whether SOL can recover from the reputational and financial damage of its association with FTX remains to be seen. The Solana Foundation has lost nearly $200 million in deposits on FTX in wake of the exchange’s collapse.

“In light of the voluntary Chapter 11 bankruptcy proceedings that FTX/Alameda announced on November 11, we do not know how these and other FTX/Alameda’s assets will be settled in the aftermath of the Chapter 11 proceedings,” the Solana Foundation wrote in its report about the assets held on the exchange. However, according to Marina Guryeva, who recently gave an interview on the podcast, Solana has “several other huge investors that are capable of like continue supporting them”.

That might ensure the project’s long-term survival. But SOL price action is looking anything but optimistic. SOL’s failure thus far to get above its 21DMA suggests that a drop towards fresh annual lows in the $10 area seems more likely that a near-term rebound back to $20. If SOL does somehow make it back towards $20, it will have to contend with significant resistance-turned-support levels from 2021 in the $18-22 area. Many sellers may be waiting here.

Solana chart
Solana faces significant resistance in the $20 area. Source: TradingView

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