Early on Wednesday, Solana’s SOL token managed to hold on to a crucial support level despite a multi-million dollar platform attack that caused some investors to express annoyance by suggesting they could consider shorting the coin.
The breach on cryptocurrency platform Solana that emptied thousands of user wallets (more than 8,000 as of writing time) wasn’t the consequence of a significant system malfunction. It was probably brought on by Slope, a distributor of bitcoin wallets, using egregiously poor security procedures.
Security firm Otter claims that the breach occurred as a result of Slope uploading users’ seed phrases in plaintext to a centralized server. A seed phrase functions as a substitute for a cryptographic private key; it is a group of words that “unlocks” the money in a crypto wallet and gives the phrase’s owner complete control over the cash. These words and phrases were sent across the internet in plaintext, which makes them a prime target for hackers.
Through the hack, an unidentified attacker stole SOL, SPL, and other Solana-based tokens worth at least $5 million from the Phantom and Slope digital wallets.
The theft sparked outrage from the investing community, and some Twitter users suggested taking a short position in SOL. Selling a borrowed security or its derivative (futures contract) with the intention of subsequently purchasing it at a lower price is how a trader establishes a short position.
SOL is now trading at a lower price as a result of the news, but sellers have so far been unable to push the token below its $37.50 50-day SMA support level. At the time of publication, the token was trading at $38.50, a 4 percent decline over the previous day.
Since breaches and vulnerabilities have typically resulted in double-digit price declines in tokens linked to victim cryptosystems, SOL’s losses seem modest. Despite this, the attack is a bad look for the fifth-largest smart contract blockchain in the world, which promises quicker and less expensive transactions than Ethereum. Solana’s promise as an Ethereum blockchain substitute has already been diminished by the many network disruptions it has experienced over the last 12 months.
What supports the token’s resiliency? Observers claim that SOL’s oversold state and the whales’ continuous ownership of the coin sustain it. It doesn’t sound like much, really.
Photo: Sandeep Swarnkar on Unsplash.
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