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Reasons Solana Suffered Significantly from FTX's Decline, According to UBS.
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Swiss bank UBS recommends caution with digital currencies, highlighting concerns arising from both general economic conditions and specific problems in the digital currency sector.
UBS analysts note that coercive actions by central banks to curb inflation by raising interest rates have significantly reduced growth prospects and appetite for investment, which is having a significant impact on areas such as digital currencies that are strongly linked to volatile technology stocks.
They also observed a "significant increase in the synchronization of Bitcoin's price movements with these stocks throughout the year."
The report highlights the turmoil in the digital currency market caused by certain events, including the failure of the Terra Luna digital currency, which started a series of bankruptcies in the industry.
This wave of bankruptcies engulfed major platforms such as Celsius and investment funds such as Three Arrows Capital. Additionally, in November 2022, the collapse of FTX, previously the second largest digital currency exchange in the world, and its associated trading company Alameda occurred.
“FTX's bankruptcy was particularly damaging due to its broad reach in the digital currency network and its previous involvement in supporting other distressed companies,” the report also states.
The collapse of FTX and Alameda not only affected their own operations, but also had a negative impact on their associated businesses and investment entities, including Genesis' $175 million financial exposure.
The UBS research paper also examines the sharp decline that followed the collapse of FTX, focusing specifically on the negative effects on Solana (SOL) and the entire venture capital landscape.
According to the report, "Through Alameda, Bankman-Fried has made direct investments in a number of digital currency projects, including Solana. In early November, Alameda disclosed that SOL was valued at over US$1 billion, accounting for an estimated 10% of the total market capitalization ."
