World on Fire: Solana CEO on the impact of coronavirus on the cryptocurrency market

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Coronavirus has affected the whole world. In March, the Dow Jones Industrial Average fell by12%, and the cryptocurrency market capitalization is 25%, 113 countries have quarantined or closed their borders.

The impact of the coronavirus on the crypto industry was discussed by Anatoly Yakovenko, CEO of the Solana project, and Kyle Samani, co-founder of Multicoin Capital Investment Fund.

Anatoly and Kyle comply with US quarantine and work from home. ForkLog magazine translated their conversation as part of the No Sharding podcast.

Anatoly:World in fire. Coronavirus has become the black swan of 2020. Do you think another crypto winter awaits us?

Kyle:I expect a spike in volatility. It’s too early to make predictions: we need to wait for the crypto market to stabilize.

Anatoly:And I believe that the market will recover. Quarantine may spur the development of decentralized systems. We continue to work on Solana from home.

Kyle:This is a positive theory.

Anatoly:Can you tell us about Multicoin Capital's plans before the panic? Did you expect the crypto market to fall?

Kyle:We were not prepared for the fall, but escaped with little loss of life. Now we follow market news and help promising companies with money.

Anatoly:It's good that the drop occurred before the launch of the Solana mainnet. On March 23, we sold SOL tokens for $1.7 million. This is less than the expected amount, but the project will grow.

Panic affected not only us: On March 12, Bitmex suspended trading for 30 minutes. Stock exchanges temporarily stop working in an emergency. But I did not think that I would see this in the cryptocurrency market.

Kyle:There has been a cascade of liquidations on Bitmex.The volume of liquidation orders amounted to $200 million, while there were $20 million of buy orders in the order book. The price of Bitcoin could fall to zero. I think this is why Bitmex suspended trading.

Anatoly:At such moments, market makers are scared.They cannot predict the behavior of the market, and therefore place orders below the current price or remove orders. Takers empty the order book and the price falls down.

The problem can be solved using adaptive circuit breakers on the blockchain. Such switches increase order execution time so that traders can cancel transactions.

Kyle:They tried to introduce a similar system on the stock market with a two-second delay. It turned out to be useless for margin trading: market makers canceled many orders and created panic.

There is chaos and without additional systems. I tell my friends: "Do not believe prices on traditional exchanges." Current quotes are the consequences of a lack of liquidity; they do not reflect the real value of the shares.

Anatoly:Cryptocurrency is the only fair market in the world.The stock market operates on derivatives, and they are backed only by obligations. If something goes wrong, the system will collapse. Will eliminating derivatives make cryptocurrencies safer?

Kyle:With derivatives, the user can earn more than the exchange pays out. There is a risk that centralized exchanges will not return deposits.

You can safely trade on decentralized crypto exchanges, but they are not designed for a large flow of applications. The solution may be the Solana blockchain.

I know that Solana has high bandwidth and low network latency. On your blockchain, it's worth launching an exchange.

Anatoly:It seems that only the creators of exchanges make money on the crypto market. What other projects are profitable?

Kyle:The number of users of DeFi services is growing, and social networks with cryptocurrencies are appearing. Messengers are trending, but payments in cryptocurrency can give social networks a second life.

Anatoly:What will happen to the crypto market if quarantine continues to kill the economy?

Kyle:Dirty competition will begin.Developers will look for vulnerabilities in competitors’ blockchains: reduce network throughput and increase transaction fees using DDoS attacks. This situation may last a couple of years until the economy recovers.

ForkLog previously published a review of Solana's Proof of History technology, which enables 60,000 transactions per second.