Solana suffers from high volatility after network was inundated with transactions

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Solana’s sol token saw strong price swings today, dropping more than 15% after the collapse of Solana’s blockchain network, then recouping a large chunk of those losses.

Digital assets fell to as low as $ 142.86 today, according to data from Messari.

At this point, the cryptocurrency had fallen more than 16% after hitting an intraday high of $ 171.48 around 5 a.m. ET, according to additional figures from Messara.

In addition, it had fallen more than 33% from the all-time high of $ 214.36 it reached on September 8.

After dropping to this level, the digital currency has started to recover, trading at $ 161.60 at the time of writing.

[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]

Technical difficulties

Much of today’s price action took place after the collapse of the Solana network, a development that was reported this morning by Decrypt.

Shortly before 8 a.m. ET, that network produced its last block, according to Solscan data reported by Decrypt.

A few hours later, around 11 a.m., Anatoly Yakovenko, founder and CEO of Solana, posted a Tweeter indicating that:

“Raydium ido bots are flooding the network at 300,000 txs per second.”

When he mentioned “ido,” he was referring to an initial decentralized exchange (DEX) offering, which took place on Raydium, an automated market maker and liquidity provider built on Solana.

About four hours later, at 3 p.m., the Solana Status Twitter account posted a update, who said :

“1 / Solana Mainnet Beta encountered a sharp increase in transaction load which peaked at 400,000 TPS. These transactions flooded the transaction processing queue and the lack of prioritization of critical messages for the network caused network startup.

Analysts intervene

In explaining the latest ground price movements, several market observers have referred to these difficulties.

While the token lost value earlier in the day, it tended to drop before the Solana network went down.

As a result, analysts also pointed out the key role that profit taking played in downward pressure on prices.

“I see today’s price action indeed as a mix between standard profit taking and the impact of recent technical events,” said Loan Venkatapen, co-founder and managing partner of Blocklabs Capital Management.

John Iadeluca, founder and CEO of multi-strategy fund Banz Capital, offered a similar assessment.

“I would say Solana’s price drop is the combined result of widespread profit taking in the market due to its mainline collapse today,” he said.

Iadeluca noted that “the price of SOL continued to rise last week as Bitcoin fell sharply, during which SOL’s RSI signaled an overbought indicator.”

After the token hit that level of overbought, it started to drop, which was likely due to some profit taking, he noted.

“The network crash was worrying, and I don’t think the market’s reaction has yet been fully taken into account,” noted Iadeluca.

Nick Spanos, co-founder of Zap Protocol, also stressed the importance of this unfortunate event, saying that “profit taking may also be partly responsible for part of the decline, but the outage is certainly the most important factor. “.

First days

Despite this unfortunate development, more than one analyst offered an optimistic view of the future prospects of the project.

“The failure of the Solana grid will undoubtedly have played a role in lowering the price of land, but it can rebound provided the grid is restored quickly and investors remain confident in the long-term project and are not too annoyed by the incident, “said Spanos.

At the same time, he said “they have to make it work fast, and if they don’t, and people don’t know how long it’s going to last, then it’s a perception issue.” .

Venkatapen also weighed in on the issue.

“The long-term potential of Solana is not affected. Ethereum during its early years also experienced similar issues which have since been largely corrected.

“What is important in this kind of situation is not the bug but how the network community is actually able to come together and provide a solution. This is exactly what we see today with Solana.

Disclosure: I own bitcoin, bitcoin cash, litecoin, ether, and EOS.

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