Wrapped versions of Bitcoin and Ether on the Solana blockchain have lost their peg to the underlying assets in the wake of FTX’s bankruptcy filing.
Bitcoin on Solana, or soBTC, was trading at $8,000, less than half the price of native Bitcoin. At one point, it fell as low as $4,000 per token.
Meanwhile, wrapped Ether on Solana, or soETH, was trading at $780 Friday evening, a 40% discount from Ether.
Bitcoin and Ether are not native to the Solana blockchain. To use and trade those tokens on Solana, users must go through a so-called bridge protocol, which holds the Bitcoin or ETH in escrow and mints an equivalent number of derivative tokens on Solana. Because the derivative tokens, soETH and soBTC, are usually redeemable for real Bitcoin and ETH on a 1-to-1 basis, they always trade at close to the same value.
With FTX’s announcement that it has filed for bankruptcy, however, the value of soETH and soBTC began to plunge relative to Bitcoin and ETH.
Both tokens are issued by FTX, according to Meow, the pseudonymous founder of Solana exchange Jupiter.
“These tokens were launched very early in the Solana DeFi cycle to help generate liquidity in the space, and [are] supposed to be backed 1-1 by BTC or ETH,” they wrote. “But unlike wBTC [Bitcoin on Ethereum] … there was no formal process and no one knows if FTX still has the underlying assets.”
If the underlying assets are gone, contagion could spread quickly in the Solana ecosystem, meow added.
“Practically all the major DeFi platforms have soBTC assets as collateral since it has long been accepted as the defacto BTC in the Solana space,” they wrote.