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Crypto wunderkind’s tokens surge to top of best-performing list

‘Solana is a promising competitor in a crowded space,’ said crypto investor Aaron Brown
Image: Akos Stiller/Bloomberg

Cryptocurrency FOMO is playing out in real time for just about any token associated with Sam Bankman-Fried, head of the trading firm Alameda Research and the FTX derivatives exchange.

In the past week, Solana — or SOL — has jumped more than 40%, making it the top performing large coin among those tracked by CoinMarketCap.com, and increasing its market value to about $11.6 billion. Serum, a token used on the new decentralized derivatives exchange created by FTX, has seen its market value jump to $494 million from $51 million this year. And the price chart for the FTT coin used on FTX looks like a hockey-stick as well, with its value jumping to $5 billion from $539 million since December.

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Bankman-Fried started to attract attention a few years ago when Alameda began regularly appearing at the top of a leader board of trading performance on the BitMex exchange. Alameda soon become one of the biggest crypto traders worldwide by focusing on arbitrage and other strategies that often profited from pricing discrepancies. After seeing his net worth soar, Bankman-Fried even became one of Joe Biden’s biggest donors during the presidential election.

“I’m always happy when people focus more on the products, but I’m also honored by a lot of the support that I and our team have been getting recently,” Bankman-Fried, who is based in Hong Kong, wrote in an email.

Bankman-Fried’s ability to stand out during a time when virtually all things crypto are having a moment is in itself head-turning. With Bitcoin surging more than 600% in the past year and Ether hitting record highs, crypto investors are again searching for the next big thing among so-called alternative coins.

The SOL token is used on the Solana blockchain, which is being promoted as the latest network to take on Ethereum in a race to become a new capital of decentralised finance.

“Sam is an extremely talented entrepreneur and has had staggering success with FTX, so it doesn’t surprise me that people are indirectly backing him by betting on his associated tokens,” said Nic Carter, co-founder of researcher Coin Metrics.

Even billionaire crypto investor Mike Novogratz is betting on Bankman-Fried-backed tokens.

Launched in the spring of 2019, the FTX derivatives exchange gives holders of the FTT token rebates on trades. The exchange recently did $14.7 billion in daily volume, and is now the world’s fifth-biggest Bitcoin futures exchange, according to Skew.com. Meanwhile, Serum has surpassed $2 billion in trading volume to date.

“The SOL rally is partially a delayed reaction to the work that’s been put into the ecosystem over the last year, and the need to find scalable solutions for DeFi as the ecosystem grows,” Bankman-Fried said.

He dove into crypto after finishing a three-year stint at the quantitative-trading firm Jane Street Capital. He started Alameda in his Berkeley, California, apartment in late 2017 with his own money and funds borrowed from family and friends. He then recruited former classmates from the Massachusetts Institute of Technology, where he majored in physics, and friends from Wall Street to create an automated trading system tracking crypto prices worldwide.

“He works US and Asia hours,” said Kyle Samani, co-founder of Multicoin Capital, which is an investor in Serum, as well as one of the largest holders of SOL. “His work ethic is insane.”

In taking on Ethereum, Solana has plenty of competition: Cardano, Binance Smart Chain and Polkadot among them. The Binance cryptocurrency exchange holds a minority stake in FTX.

More than 150 different apps have been built for Solana already, and apps like the messaging service Kin moved users over, said Raj Gokal, chief operating officer of Solana Labs, which is building software for the blockchain.

Solana is already doing 10 times more in daily transactions that Ethereum, Samani estimated.

“Solana is a promising competitor in a crowded space,” said crypto investor Aaron Brown, who writes for Bloomberg Opinion. “It’s been going up because it’s a good blockchain that seemed to be gaining ground recently, but there are lots of good blockchains and (as everyone knows) the sector is volatile and prone to short-term enthusiasms.”

© 2021 Bloomberg

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