Solana, a chain once valued at almost $80 billion, is now down around 96% to be at a $4 billion valuation. This is due to various factors, including FTX’s collapse, general market conditions, and competition. Is this once-top smart contract chain experiencing a nasty bear market, or is it slowly creeping toward permanent irrelevance?

Solana was created during the peak of the previous bull market in late 2017. It was intended to be a scalable and usable blockchain that did not need to rely on any extra scaling solution, like layer 2s. To achieve their high 40,000 transactions per second throughput, each transaction contains a cryptographic timestamp that allows transactions to be processed in parallel.

Solana’s initial rise was in large part due to the support and funding of its backers. Then-top cryptocurrency exchange FTX chose to build their decentralized exchange, Serum, on Solana and were large bakers of the ecosystem. In addition, they had one of the biggest treasuries in crypto and had dedicated hundreds of millions of dollars to ecosystem development. Arguably Solana’s biggest draw was its excellent user experience; the blockchain had wallets easy enough for anyone to use, with transaction times to make it feel like a Web2 experience.

All of these capabilities, along with congestion on the leading smart contract blockchain Ethereum, caused Solana to skyrocket in popularity and reach a total value locked of $10 billion representing 5% of all of DeFi. Furthermore, NFT projects and communities achieved widespread success on Solana, likely primarily due to its simplicity and ease of access among novice cryptocurrency users.

However, not all was well for the promising chain. It experienced several outages with hours-long downtimes that resulted in nobody being able to transact on the network. As the initial excitement of the chain wore off in early 2022, its TVL began falling and never seemed to stop. In August of 2022, it was revealed that two DeFi developers created a set of protocols that artificially double-counted and inflated the Solana TVL, with high-end estimates suggesting that up to 75% of Solana TVL could have been fake. Then, after the recent FTX collapse, Solana’s price dropped by over 50% overnight, and the mass exodus of Solana’s value continued. This was a massive blow to the already-weak Solana ecosystem, and projects are now beginning to migrate to other blockchains. One of the biggest is the y00ts NFT project, a massive NFT community that recently announced they will be bridging to Polygon in 2023. One of Solana’s biggest strengths was its community, and even that is now coming under fire.

There are a few main arguments for the continued success of Solana. First, their community, though weakening, is strong and seems dedicated to building and promoting the Solana ecosystem. Second, suppose they can continue to develop their technology and reach the point where outages are no more. In that case, it could be a legitimate threat to Ethereum due to its simplicity and scalability. Finally, Ethereum also experienced massive slumps during bear markets and recovered without issue so it may be the same for Solana. This argument is likely the weakest since we’ve seen other alternative Layer 1s like NEO, EOS, and ICON achieve massive valuations and then not survive the bear market.

Even though Solana seems to be creeping its way toward a slow death, nothing is inevitable in the cryptocurrency space. Solana does seem to be on life alert though, and buying it now would be an enormous gamble. That being said, if the development team continues to deliver, builders stay focused, and some applications capture mainstream attention, the chain could once again achieve a near-$100-billion market capitalization.