Solana's 20% Price Surge Driven by Network Upgrade and Rising Dapps and NFT Volumes
Summary:
Solana (SOL) price increased by 20% between Sept. 28 and Oct. 6, following a turbulent period marked by legal approval of a $1.3 billion sale in SOL from the bankrupt FTX exchange. This price revival coincided with a successful network upgrade to version 1.16 and was backed by growing usage of decentralized applications (Dapps) and a rise in nonfungible token (NFT) volumes. While Solana faces stiff competition from Ethereum's layer-2 solutions, the network's recent upgrade and strong focus on efficient, scalable solutions for the thriving NFT market are marking significant milestones in its development.
Between September 28 and October 6, the price of Solana (SOL) surged by 20%. The question arises whether this growth was in sync with Bitcoin (BTC) or spurred by extraneous circumstances. Preceding this price upsurge, or more accurately, its resurgence, SOL grappled with volatility after a U.S. jurisdiction authorized the auction of $1.3 billion in SOL from the insolvent exchange FTX. The Solana daily price index, USD, indicates this (Source: TradingView).
In an initiative to prevent the FTX asset clearance from overloading the crypto market, the insolvency tribunal demanded the transaction to proceed in weekly chunks via an investment advisor, following pre-set guidelines. After an early shock that plummeted Solana's price to a two-month low ($17.34 on September 11), investor spirits lifted as SOL managed to reassert its $20 support on September 29. Tied to this was a successful upgrade to version 1.16, triggering a 7-day 16% surge in the SOL token.
Growth in the utilization of decentralized applications (Dapps) and a rise in nonfungible token (NFT) volumes backed Solana's rally. Solana's current endeavor is to secure a $23 support and solidify its status as the fifth largest cryptocurrency (excluding stablecoins) by market cap, outreaching Cardano's $9.22 billion.
Analyzing networks dedicated to Dapp execution, the population of active users is of paramount importance. As such, quantifying the addresses involved with smart contracts, or proxies for the user count, is the logical first step.
Solana Dapps active addresses over a week (Source: DappRadar)
It is evident that activity expanded consistently across all sectors, including NFT marketplaces, DeFi, collectibles, social, and gaming. Notably, Solana's active addresses engaging with Dapps outstripped those on Ethereum in a similar period, capped at 55,230.
The Solana network benefits from its affordability and scalability in the thriving NFT market. Data is compressed and held off-chain, facilitating more feasible production in bulk due to cheaper minting fees and hence broadening the reach (Source: Cryptoslam).
Over the last seven days, Solana's NFT sales volume outdid Polygon (MATIC), amassing a value of $6.8 million according to Cryptoslam. In contrast, September presented an opposite scenario where Solana recorded NFT sales worth $23.9 million versus Polygon's $31 million.
In large part, Solana's recent 20% price rise can be attributed to its upgrade to version 1.16 carried out on Sept. 28. This introduced a "gate system" to ensure systematic activation of fresh features, maintaining network stability and avoiding sudden modification-based issues.
Significantly, the new version presents "confidential transfers," using zero-knowledge proofs to encrypt transaction details, thereby enhancing user privacy. Additional improvements include enhanced RAM usage by validators, resizable data accounts, and a corrupted data detection mechanism.
Overall, this upgrade portrays Solana blockchain in a new light, more efficient, private, and secure, marking a significant step in its evolution.
Despite Solana's competition with other blockchain networks, Ethereum's layer-2 solutions have managed to attract more activity and total value locked (TVL) thus far. For instance, Arbitrum holds $1.73 billion in TVL, and Optimism holds another $637 million, dwarfing Solana's $326 million, according to DeFiLlama.
So even though Solana is making strides in privacy, scalability, and security, external forces are also at play, making the $23 resistance appear more formidable than expected. As of now, investors' prime focus remains Ethereum's ecosystem, considering its position as the leader in terms of developers and established decentralized applications.
Disclaimer: This piece is primarily informational and does not constitute legal or investment advice. Any views, thoughts and opinions expressed are solely those of the author and do not necessarily represent those of Cointelegraph.
Published At
10/6/2023 5:54:49 PM
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