Analyzing Solana’s SOL Recent Performance Amid Market Shifts and NFT Interest
Summary:
Solana's cryptocurrency, SOL, had experienced impressive growth of 58.6% within just five days, cresting at $64 on Nov. 11. However, it retracted 11.3% across the following two days. Despite this decline, investors shouldn't hastily adopt a bearish outlook as underlying metrics of Solana's network remains positive. Moreover, Solana's ability to attract the upper tier of non-fungible token (NFT) markets, amid high costs on other platforms like Ethereum, fortify its position in the market. Nonetheless, SOL's heightened market capitalization in comparison to its peers has roused investor interest.
Experiencing a significant 58.6% increase within five days, Solana's native cryptocurrency, SOL, soared to an impressive high of $64 on November 11. However, as the rate backtracked 11.3% down to $54 over the following two days, investors started wondering if the bullish momentum was loosening its grip or if this was simply a transient price resetting. If we juxtapose Solana's recent spike with other top tier altcoins, we can clearly spot SOL's sub-par performance in the wider altcoin spectrum. For instance, since its zenith on November 11, Avalanche (AVAX) has climbed 17%, Ether (ETH) has seen a 1% increase, but BNB Token (BNB) has slipped 2%. The dip SOL saw of 5.5% on November 13 is probably not attributable to overarching economic factors or the possibilities of a spot BTC exchange-traded fund (ETF) getting the green light. Despite the recent stumble in SOL's value, being up 35% over the last seven days suggests that it's too premature for investors to succumb to bearish views. They could very well be experiencing a rise and fall trend that is common after significant success. However, it's crucial to not dismiss the underlying metrics of Solana's network, which include on-chain analytics and the derivative markets of SOL. Over-usage of leverage by traders can sometimes result in compulsion liquidations, a critical factor in perpetual contracts or inverse swaps affected by fluctuating funding rates. Perpetual contracts, otherwise known as inverse swaps, embed a rate typically adjusted every eight hours. If the funding rate is in the positive, it denotes that longs (buyers) are eager for extra leverage, while a negative rate reveals short (sellers) needing added leverage. As per on-chain analysis from almost centralised networks bearing significantly low transaction fees, they carry inherent risks, especially as metric inflation is simple to execute. This is particularly true in the case of decentralized finance (DeFi), as seen in the case of a former Saber developer who revealed in August 2022 that a large section of the decentralized exchange's (DEX) total value locked (TVL) was forged through double-counting. Solana currently records a TVL of $535 million, although sizeable, it's modest in comparison to its nea rivals. Despite having a remarkable market capitalization of $22.7 billion, Solana lags behind Avalanche which boasts a TVL of $614 million. By the same token, Polygon's (MATIC) TVL is higher at $840 million, with a market cap of $8.2 billion, drawing attention to the discrepancy. Moreover, considering the substantial future request for the SOL token, the collection of 7-day fees amassing $660,000 for Solana's network doesn't seem to validate this. Even severe increases in this figure can't offset the surge in token supply, which over the past 90 days has grown by 3.7%, translating into $65 million per week. Alongside the regular issuance of SOL, there are financial obligations tied to the unsuccessful FTX-Alameda Research exchange, permitting the bankruptcy estate to sell up to $100 million in digital assets per week, which includes 55.75 million SOL in September 2023. Despite high costs associated with issuing and maintaining collections on Ethereum, the leading blockchain, Solana's entry as a robust player in the non-fungible token (NFT) market has been notable. However, it hasn't yet drawn high-value items and heavy-hitters to its NFT markets. Even with the escalating transaction fee for the Ethereum network, currently at $7.6, its weekly NFT volume still outpaces Solana's by more than 7 times. Despite SOL price correcting by 5.5% on Nov. 13, this reduction doesn't suggest a decrease in network activity or curtailed demand for leverage longs leveraging futures contracts. Yet, it has raised investors' awareness of SOL's hefty market capitalization compared to its counterparts. The scale of the correction is still unknown. This text is purely informational and should not be considered a form of legal or financial advice. The view expressed is solely that of the author and do not aim to reflect the views or opinions of Cointelegraph.
Published At
11/13/2023 9:14:33 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.