Solana is among the top coin in the crypto industry, but the price action hasn’t been that great lately. After the initial rally to its all-time high past $200, the price has been falling and is now near $50. While all this is fine, as we have been in a bear market for a while, there is one primary concern. Solana’s massive VC holding could be an issue if they sell in the open market. It could tank the token, and Solana will become the next Luna.
What is Solana?
Solana is a functional open source project that uses the permissionless feature of blockchain technology to create decentralized finance (DeFi) solutions. The idea and first work on the project began in 2017. And then the Solana Foundation, with headquarters in Geneva, Switzerland, formally launched Solana in March 2020.
The major USP of Solana is the cheap transactions and high speed. This makes it comparable to even the top payment networks like Visa and Mastercard. Solana also uses a unique proof of history consensus that allows scalability but only with the help of additional hardware. However, it is the only project in the top 10 coins that have been down multiple times. The multiple outages are concerning, but it is still not the biggest issue.
Solana’s biggest downside
While Solana’s website claims that they are decentralized, in reality, it is a highly centralized project, with its VCs holding nearly 30% of the entire supply. Now, why could this be a problem? Doesn’t every project have VC holdings? Yes, to an extent, that’s right, but this high concentration of funds means if the price tanks further and VCs dump their tokens, the price could crash easily. Since VCs acquire tokens at a very low price, they will still make profits, but retailers will be left hanging. This, combined with the frequent outages, means that Solana hodlers could be in a big problem.
If you are invested in the crypto markets or are planning to get started, it’s important to choose projects that are not very centralized for less risk.
What are your thoughts on Solana’s massive VC holding? And do you think that it could lead to a crash in the project? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.