Solana's native token, SOL, reaches highest point in 23 months, trading up 34.5% in a week. Explore the factors behind SOL's recent rally and its sustained outperformance compared to competitors.
Solana's native cryptocurrency, SOL (SOL), achieved its highest point in 23 months on March 1, currently showcasing a 34.5% surge within the past week. Despite retaining its position as the fourth-largest cryptocurrency, excluding stablecoins, Solana has been steadily closing the gap with its third-place rival, BNB (BNB). The central question lingers: What propelled SOL's recent rally, and more importantly, can this superior performance against its competitors be sustained?
Over the last couple of months, SOL's price had been striving to solidify the $100 support. Contrary to assumptions, the bull run did not initiate before Feb. 23. In reality, between Dec. 23, 2023, and Feb. 23, 2024, SOL experienced a modest 2% increase, while Ether (ETH) observed a 25.5% uptick and Tron (TRX) achieved gains of 31.5%. Whatever triggered SOL's favorable decoupling occurred within the past week.
Alongside the substantial gains on SOL, several Solana SPL memecoins witnessed a surge in demand. Bonk recorded a 110% increase since Feb. 23, and DogWifHat (WIF) rallied significantly by 250% during the same period. Notably, this trend extended beyond Solana network tokens, as Dogecoin (DOGE) and Shiba Inu (SHIB) also registered around 51% gains since Feb. 23. It's probable that some of this demand spilled over from these popular tokens, influencing SOL as traders pursued gains on decentralized exchange (DEX) listings.
On Feb. 27, The New York Times reported that Sam "SBF" Bankman-Fried, the convicted former CEO of the failed FTX exchange, had allegedly recommended prison guards to invest in SOL. While the relationship between SBF's opinion and SOL's gains remains uncertain, the timing of the article publication raises questions.
Examining Solana network metrics is crucial to determine whether the recent surge in SOL's price is rooted in increased demand beyond speculation. SOL is integral to DEX trading, staking solutions, nonfungible token (NFT) marketplaces, and various decentralized applications (DApps) like gambling, games, and social networks.
The Total Value Locked (TVL) in Solana's smart contracts can impact SOL's price, with a higher TVL indicating heightened user activity and demand for Solana-based DApps, potentially positively influencing the price.
Recent data highlights a noteworthy achievement for Solana: Its TVL reached the highest level since November 2022, standing at 40.7 million SOL, marking a 30% increase year-to-date in 2024. In comparison, Ethereum's TVL in ETH terms increased by 15% during the same period, and BNB Chain recorded a 12% uptick in BNB deposits since Dec. 31, 2023. This underscores Solana's success in attracting more activity for DApps compared to other platforms.
Further investigation into the impact of this TVL growth on the Solana network reveals that certain DApps can effectively manage substantial volumes and a large user base without requiring significant deposits.
Solana's notable surge centers around the OpenSea NFT marketplace, contributing to a substantial weekly volume of $7.8 billion, as reported by DappRadar. Even when excluding this, other Solana DApps have witnessed significant volume increases. For instance, the Jito staking solution saw a remarkable 102% surge in just one week, while the cross-chain liquidity exchange Saber experienced a noteworthy 130% increase in volume during the same period.
Solana's success can be attributed in part to the challenges faced by other competing blockchains dealing with sudden spikes in transactions. For example, the Avalanche network encountered a block production halt on Feb. 23 due to inscription-related issues. While Solana has had its own challenges, such as a five-hour outage on Feb. 6, acknowledging these problems mitigates the negative impact, shedding light on the widespread scalability challenges in the industry. Nevertheless, network metrics indicate no evidence that the SOL token is approaching any kind of peak.
This article serves general information purposes and should not be considered legal or investment advice.