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Solana (and the crypto market) is at the mercy of Vladimir Putin


In the year 2022, already filled with drama, it becomes increasingly clear that we live in the world of Russian President Vladimir Putin. Even decentralized cryptocurrencies like Solana (SOL-USD), which should in theory be independent of geopolitical rumblings are no match for its incredible influence.

Source: Trismegist san / Shutterstock.com

Russia has engaged in multiple armed conflicts, adjusting the world map as it sees fit. Yet it often seems that many people remain determined to focus on China, not Russia, as America’s most significant geopolitical adversary.

I find this strange because in recent weeks Russia has brought everyone to the brink of World War III and for good measure has brought the spirit and integrity of the Olympic Games into disrepute. I don’t know what else the Kremlin can do to get higher on the US “adversary list”. This all brings me to Solana.

If you’ve followed the cryptocurrency space, you’ll know that Solana is part of the next generation of utility blockchain projects. In short, the first crypto, Bitcoin (BTC-USD), demonstrated the viability of sending digital assets over a decentralized distributed network without the need for a third-party intermediary. Later, Ethereum (ETH-USD) has brought decentralization to a range of applications through smart contract technology.

But either way, these revolutionary blockchain networks have become too big, cumbersome, and expensive. This is where Solana and similar projects came into the picture, offering speed, scalability, security, all at low transaction costs.

It was magnificent until Putin appeared.

Putin exposes the economic realities of Solana and crypto

If you have followed geopolitical developments not just this year but for many years, you will know that Vladimir Putin has big ambitions. In fact, a 2016 article by US News and World Report noted that Leon Panetta, a man who has held several high-level government positions, bluntly called Putin’s motivation.

“Let’s not fool anyone,” Panetta remarked. “Putin’s main interest is to try to restore the former Soviet Union. I mean, that’s what drives him.

Well, restoring the Soviet Union means taking over Ukraine – or at least installing a pro-Russian puppet government in Kiev. So if you understand the story and are willing to be honest, the Kremlin’s aggressive posture towards its neighbor is unsurprising. But the fact that it would go so far was certainly troubling, which then revealed a critical vulnerability regarding Solana and similar advanced cryptos.

You can shout all you want about your speed, scale, and immutability. Hit yourself with as many blockchain magic words as you want: decentralization, democratization, multi-shard operations. When it mattered most, most people didn’t care about the technical wizardry of Solana or any other crypto. Instead, all eyes were on Putin, just as I imagine he would like.

It’s simple, really. Putin orders troops to march to the Ukrainian border and the entire capital markets – including cryptos – shook, then crashed. Centralization or no centralization, investors panicked as the Russian leader flexed his muscles.

But should it be so? Theoretically, a decentralized asset should be largely decentralized from the concerns of centralized rumbles. I understand if the dollar faltered during the Ukrainian crisis. Everything goes through the dollar.

But Solana? It’s an altcoin – and not even the most popular. Yet when the world shook, so did SOL.

Different name, same game

Decades ago, an arsonist burned down the home of legendary rock star Tom Petty. Naturally, he was so shaken by the incident that he rebuilt his house – with fireproof materials. On paper, this should prevent any arsonist from causing fire damage to their home again. However, I imagine it probably won’t do much if the fire started from within.

And that’s the dilemma that Solana finds herself with the conflict in Eastern Europe. On paper, its decentralized profile should shield it from the volatility associated with centralized assets embedded in the global economy. However, when Putin roared, many people cashed in across all investment categories and took cover.

Just as he did with the credibility of US foreign policy, Putin also exposed the credibility of Solana and similar cryptos. They can talk about a tough game about decentralization and all that jazz. But in the end, it all comes down to human emotions. And right now, Putin is the ultimate puppeteer.

As of the date of publication, Josh Enomoto held a LONG position in BTC and ETH. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto helped negotiate major contracts with Fortune Global 500 companies. Over the past several years, he has provided critical and unique insights to the investment markets, as well as various other industries including law, construction management and healthcare.

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