Finance

Unveiling the Dynamics of Solana’s Striking 2023 Peak: The Catalysts for the SOL Surge!

Solana’s Native Token, SOL, Experiences an Impressive Surge

On November 10, Solana’s native token, SOL, enjoyed a remarkable 22% surge, breaking past the $54 mark for the first time since May 2022. Notably, this surge came amid the ongoing sale of SOL tokens by FTX’s bankruptcy estate. The Delaware Bankruptcy Court had approved the sale of the defunct exchange’s assets, which involved 55.75 million SOL, in September 2023.

Investor excitement for the spike in SOL’s price may be credited to the fact that some of the tokens from the bankruptcy procedures are either vested or locked. Additionally, there’s a weekly sale limit of $100 million as part of the FTX liquidation plan. Initially, the fear of asset liquidation transformed into hope as investors understood the limited impact of the sales.

Interestingly, despite selling between 250k-700k SOL everyday for the last two weeks, the price has been either going up or moving sideways. This data suggests that once the seller’s tokens are depleted, it’s potential for growth could be significant.

The Buoyancy and Potential of SOL

Trader and independent analyst Bluntz shed light on SOL’s resilience during the FTX bankruptcy token dump, adding a bullish case for SOL. He stated: “Once this seller is gone, I can only imagine how hard it’s going to pump.”

The considerable 39% weekly gains SOL has gained has pushed the futures open interest to $745 million, its highest level since November 2021 when SOL achieved its all-time high of $260. A positive funding rate indicates that longs (buyers) require more leverage shed light on SOL’s resilience during the FTX bankruptcy token dump, adding a bullish case for SOL, stating: “Once this seller is gone, I can only imagine how hard it’s going to pump.”

Growth in Solana’s Ecosystem

While it can be debated whether derivatives markets were the primary drivers of SOL’s rally, there is solid proof of growth concerning deposits and use of decentralized applications (DApps) within the Solana ecosystem.

The total value locked (TVL) in Solana, which gauges the amount deposited in its smart contracts, has reversed its slowing trend after six continuous weeks. This may represent a turning point.

To validate that this movement isn’t solely driven by a few large holders boosting TVL, it is crucial to assess the number of users using active addresses. Ranking as the fourth-largest blockchain in decentralized finance (DeFi) TVL, Solana has seen a 28% rise in the number of active addresses.

Further Implications for Solana and SOL

On the positive side, SOL token bulls gain from the heightened network activity and greater TVL. Still, Solana’s current market cap of $22.8 billion has almost tripled Polygon’s $7.8 billion, despite both networks having comparable DeFi TVL, which raises questions about the sustainability of SOL’s bull run above $54.

Comparatively, Solana protocol’s accrued 30-day fees totaled to $1.9 million, versus Polygon’s $1.6 million. However, these figures are minor compared to BNB Chain’s $9.1 million, questioning the valuation following SOL’s recent rally.

While there’s no evident reason to bet against the trend, as there’s no excessive leverage demand observed in SOL derivatives contracts, the fundamentals suggest limited room for further upside. Therefore, investors should bear this in mind while approaching Solana’s ecosystem and token.

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