VOT Research Desk
Market Analytics and Technical Considerations
To move USDT from the Solana blockchain to the Ethereum blockchain, stablecoin issuer Tether made today an announcement of a $1 billion chain swap.
The announcement comes at a time when Solana, which was one of the five largest cryptocurrencies by market cap just a few weeks ago, is having problems as a result of the collapse of the crypto exchange FTX. By market cap, Solana is now 16th and has lost 25.4% in the last seven days. It is currently worth $13.33, which is 95% less than its all-time high of $256.
The transfer of cryptocurrencies from one blockchain to another is known as a chain swap .When demand for its stablecoins shifts from one blockchain to another, Tether has done this in the past. For instance, Tether twice switched $1 billion in USDT from Tron to Ethereum within two months in the middle of 2020.
Solana, also known as SOL, is a smart-contract blockchain competitor to Ethereum like Tron and others. Following the FTX disaster, every major cryptocurrency, including Bitcoin and Ethereum, has experienced sell-offs, but Solana has been particularly hard hit.
One of the largest exchanges in the past, FTX, has strong ties to Solana:Serum, Solana’s primary decentralized exchange and DeFi liquidity provider, was developed by the company, which has made significant investments in several crypto projects related to Solana.
Serum was effectively taken offline on November 12, when withdrawals were disabled due to an alleged hack of the FTX exchange. Fearing that the project’s private keys, which were also stored within FTX, had been compromised, Solana DeFi developers disabled access to Serum.
In addition, the non-profit Solana Foundation, which contributes to the development of the Solana blockchain, acknowledged that it had $1 million in cash or assets of a comparable value stuck on FTX.
The world’s largest digital asset exchange, Binance, announced yesterday that it had temporarily suspended deposits of the major stablecoin USD Coin (USDC) and Tether (USDT) that operate on Solana’s blockchain.Crypto.com also said last week that it would stop supporting USDC and USDT on Solana.
Cryptocurrency traders frequently make use of stablecoins. Because they are pegged to real-world assets like U.S. dollars or euros, major cryptocurrencies like Bitcoin and Ethereum are not volatile. Instead, they help those who buy and sell digital assets quickly without having to access fiat currencies. Stablecoins are, as a result, useful tools in the DeFi world.
Tether is the largest stablecoin issuer in the world, and its digital dollar, euro, and yen tokens can be used on Ethereum, Tron, and Polygon blockchains, among others.
When its exchange and related entities collapsed this month, investors lost billions of dollars in one of the most widely reported crypto stories of the year. Alameda Research, a trading company founded by exchange CEO Sam Bankman-Fried, was the channel through which FTX was placing bets with funds from the exchange.
The company was forced to admit that it did not hold one-to-one reserves of customer assets following a back run on FTX last week, which resulted in the freezing of withdrawals and the subsequent filing for bankruptcy.
