The world now knows many of the details that connect the $Libra coin, President Milei's meme coin, with alleged serial rug puller Hayden Davis.

Davis apparently also launched the disastrous $Melania token. He is connected to Meteora Cofounder Ben Chow, who resigned after videos surfaced that the latter appears to have facilitated the rug pull.

$SOL has sold off dramatically in the wake of these events because trust in the blockchain has eroded.

Is now the time to buy?

1 A Bit More News

Apart from the video evidence that Defi Tuna surfaced, I'm always floored that crypto criminals don't think other people will notice.

The blockchain is an open ledger, and it's rather simple to track where the money went. Below is Arkham's reconstruction of events. It clearly ties the $Libra token to the $Melania token, and both to Metora and Jupiter--the largest dex on $SOL.

2 Short-Term Market Health

We know that unemployment isn't a problem (Sahm Rule is below .5 at .37). And that the market financial conditions are loose--as measured by the National Financial Conditions Index.

The VIX Term Structure is a shorter-term indicator--focused on the S&P 500--which gives us a view over the next 5 to 7 days roughly. It's predictive of the crypto market so long as the S&P500 and cryptos remain correlated.

Right now, we see a firm contango structure--up and to the right with each dot = healthy.

3 Catching Falling Knives

The thing about catching a falling knife is that it looks cool if you manage to pull it off. When trading, you get maximal profits.

Over the years, I've learned to prefer forgoing the "cool" outcome and exercising patience. $SOL sits comfortably below its SMA 200 (red line). Why not just wait until it crosses back above.

We don't know what the fallout will be, so the downside might be significant. The additional upside to buying now isn't worth the risk.

4 Re-Entry Noise

Using the SMA 200 would have had you buy $SOL at $23 a coin and hold for better than 5x.

Now is your chance for a similar reset. But do expect some noise. Before $SOL recently rocketed off to nearly $300 a coin (intra-day), it bounced around the $140 - $160 range for a bit.

I'd expect something similar to happen with a reputation reset after this debacle.

5 Concluding Thoughts

$SOL has come back from far worse reputational threats.

To speak of the other one, the upcoming FTX estate unlock is owned largely by institutional payers (such as Multicoin and Galaxy Digital) who plan to hold for the long run.

I thus see neither this reputational damage nor the big FTX "unlock" as a long-term headwind. The macroeconomy will matter, and thus far, it's ok.

So, yes, $SOL is worth picking up in the above environment ... but I wouldn't go in early. I'd also expect some chop.

Happy Trading!

As always DYOR. NFA.

-Sebastian Purcell, PhD

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