SOL Experiences Unprecedented Surge Then Falls Back: What’s Next?
Last week, cryptocurrency enthusiasts witnessed an unexpected surge in Solana’s native token, SOL, which recorded an impressive 58.6% growth within five days, reaching $64 on November 11. However, SOL’s value dropped by 11.3% over the next two days, leading to many discussions within the investment community regarding a possible fading bullish momentum, or perhaps a temporary price adjustment.
SOL’s Performance Compared to Other Altcoins
In order to provide context to SOL’s performance, it is useful to compare it with other leading altcoins. Since their peak on November 11, Avalanche’s AVAX, Ether (ETH), and BNB have seen various movements, with AVAX rallying by 17%, ETH gaining 1%, and BNB decreasing by 2%. To many, this indicates that SOL may have underperformed in the broader altcoin market, therefore, the drop on November 13 might not be connected to external macroeconomic or sector influences.
Solana: A Consistent Performer Despite Lower Price
In spite of the fall, SOL’s 35% gain over seven days suggests that investors should hesitate before adopting a bearish outlook. It could simply be a natural correction following its dramatic rise. That said, one cannot neglect the fundamentals of the Solana network, including on-chain metrics and SOL’s derivatives market, which could potentially indicate future price trends.
Funding Rates and Leveraging
When considering the derivatives market, leverage use by traders becomes a key factor. Traders with excessive leverage may face forced liquidations, especially with perpetual contracts or inverse swaps where funding rates play a vital role. For SOL, the seven-day funding rate aligns with that of Bitcoin and ETH, pointing to a slightly higher demand for leverage longs.
Solana’s Market Capitalization and TVL
In terms of market capitalization, Solana’s standing is impressive. The cryptocurrency’s market cap has amplified by 10.5% over the past fortnight, to $1.4 trillion, the highest since May 2022. However, the converse is true when considering Solana’s Total Value Locked (TVL). The $535 million TVL of Solana is significantly lower compared to its competition.
NFT Data Indicates Potential for Solana
Solana’s entry into the nonfungible token (NFT) market has been one of its most significant features, especially because of the high costs associated with issuing and maintaining NFT collections on leading blockchains like Ethereum. However, despite this competitive advantage, it has not managed to attract the biggest whales to its NFT market yet. Still, it maintains a significant position in the market, alongside the leaders, Bitcoin and Ethereum.
Despite the price trickle experienced on November 13, it does not necessarily indicate a decline in network activity or demand for futures contracts using leverage longs. However, the overall market capitalization of SOL compared to its peers has certainly got investors talking. It remains to be seen how much further this correction will go.
This article is presented for informational purposes and is not intended to be considered as legal or investment advice. Readers should conduct their own research before making any financial decisions. The views and perceptions expressed in this piece are those of the author and do not reflect the opinions of any other entity.