(Bloomberg) -- Almost a year after the demise of Sam Bankman-Fried’s crypto empire, one of the blockchain projects most associated with the now disgraced entrepreneur is emerging from under the cloud his downfall cast over the digital-asset world. 

Solana’s SOL token has surged about 340% to $41 in 2023, outdoing the 114% rally in market bellwether Bitcoin and becoming the best performing token among the largest cryptocurrencies tracked by Bloomberg. That follows a 94% drop last year as Bankman-Fried’s FTX and Alameda Research — two major backers of the project - collapsed into bankruptcy.

The token has doubled over the last 30-days amid the launch of a software solution dubbed Firedancer and the broader rally in the crypto market. Testing of the Firedancer network was announced this week at a Solana-themed Breakpoint conference in Amsterdam that attracted developers, investors and users of the blockchain.

Solana is among the blockchains competing with Ethereum, crypto’s key commercial highway, for a bigger share of digital-asset activity. It differentiates itself by offering lower transaction costs and faster processing speeds. VanEck Associates wrote in a recent report that the Firedancer update “promises to exceed Solana’s current capacity by a factor of 10.”    

Matthew Sigel, head of digital asset research at VanEck Associates, told Bloomberg that SOL’s recovery this year is proof that the project has moved beyond the FTX overhang.

“One or a handful of layer-one smart contract platforms are likely to capture the majority of value intermediated by open-source blockchains. We think Solana is undervalued based on the probability we ascribe to SOL being the first blockchain to host an application with 100 million users,” Siegel said. 

Often riddled with network outages, Solana has seen only one such incident this year against 14 such in 2022, as per Solana Status.

Despite this year’s recovery, SOL is still trading at a fraction of the $260 achieved in 2021 during the pandemic-era frenzy that lifted crypto. And some market observers say the network still faces additional challenges. 

“In the upcoming bull cycle, Solana will encounter stiffer competition than it experienced in the prior cycle,” said Kunal Goel, a research analyst at Messari. “We’re witnessing the rise of blockchains which rival Solana’s speed like Sei, Aptos, and Sui.” 

Even so, there’s been strong institutional interest in SOL as it stands as the best performing altcoin from an inflows perspective. In October, SOL saw a net inflow of $67 million via exchange-traded products, the second highest after Bitcoin, according to data shared by asset manager CoinShares.

A recent digital asset fund manager survey by CoinShares also showed that around 7% of the respondents believe Solana to have the most compelling growth outlook, an increase from 3.4% respondents last year.

“People are following the movements of FTX estate [and] I think people realize the selling pressure probably isn’t as much as expected,” said Shiliang Tang, chief investment officer at crypto investment firm LedgerPrime. 


--With assistance from Muyao Shen.

©2023 Bloomberg L.P.