Solana's Market Fluctuation Raises Questions Over its Growth and Network Activity
Summary:
Solana (SOL) noticed a significant 36.6% increase in value between October 30 and November 2, but its inability to surpass the $44.50 mark resulted in a 10% price correction. This market fluctuation sparks debate over whether Solana's growth and network activities justify its current $16.9 billion market capitalization. Despite new developments, such as the Firedancer launch and presenting the network dataset on Google Cloud BigQuery, the blockchain network faces criticism over centralization and its comparatively smaller DApp user base. Furthermore, Solana's total locked value and DApp volumes trail behind competitors such as BNB Chain, Polygon, and Avalanche.
Between October 30 and November 2, the value of Solana (SOL) saw a significant rise of 36.6%. But a failure to surpass the $44.50 threshold has caused a 10% price adjustment, pushing SOL to $40 on November 6. This fluctuation has investors speculating whether Solana’s growth and network activity justify its current market capitalization of $16.9 billion.
The Solana token reached a high of $44.50 on November 2, a peak unseen since August 2022. This surge coincided with Solana's Breakpoint 2023 global conference in Amsterdam. As the excitement around the token grew, BitMEX co-founder Arthur Hayes confessed to investing in SOL, despite once dismissing the token as "just a meme."
During the Breakpoint conference, the Solana Foundation launched the testnet of Firedancer, a client designed to provide increased speed and reliability for validators while reducing hardware demands. The project addresses long-standing criticism of the layer-1 blockchain and its promise of parallel computing for smart contracts.
Moreover, on October 31, the Solana Foundation made its network dataset available on Google Cloud BigQuery, a serverless data warehouse platform with embedded machine learning and AI capabilities. This enables developers and corporations to transparently and safely access archival data and analytics insights.
Despite these advances, it hasn't been all smooth sailing for Solana. For instance, on October 17, decentralized liquid staking protocol Lido Finance decided to abandon the network due to economic unviability and low fees. This decision led to a community vote which officially put an end to the service.
The key question remains: does Solana's on-chain activity and decentralized application (DApp) metrics justify the SOL price increase? This necessitates a comparative study between Solana's on-chain data, ecosystem growth and that of its competitors.
Recently, Solana has shown weaknesses in its primary DApp metrics. Data from November 5 suggest that the network's total value locked (TVL) hit a two-year low. Over a 30-day period, Solana saw a 30% drop, compared to a 2% decline for Ethereum and an 8% decrease for BNB Chain.
Although Solana has maintained low fees and ongoing development post the FTX-Alameda Research fallout, the number of active users hasn't seen a similar increase. Raydium, Solana's top decentralized exchange (DEX), reported only 17,380 active addresses in the past 30 days. Star Atlas, the network's most popular game, recorded 12,420 unique addresses over the same period.
In contrast, BNB Chain's DEX, PancakeSwap, had 513,060 active addresses in the last 30 days, and the Stargate game drew in 106,400 users. Similarly, Avalanche's DEX, Trader Joe, had 54,130 active addresses, and its leading game, Galxe, registered 32,040 unique addresses.
More worrying, however, is that Solana's DApp volume only reached $609 million in the past 30 days, significantly lower than BNB Chain's $11 billion, Polygon's $5.3 billion, and Avalanche's $727 million in DApp volume.
Additionally, the network has faced criticism for requiring KYC and AML to become a validator, which was highlighted by a user named StakeWithPride on a social network.
Another concern raised by user arixoneth on X social network is that out of 1,997 validators, 1,818 (almost 90%) received delegations from the Solana Foundation or Alameda.
Issues pertaining to centralization, along with concerns around validators and development subsidies, as well as a seemingly small DApp user base compared to other networks, have led to discontentment among SOL token holders. Ultimately, the recent surge in Solana’s price doesn't seem to be supported by its on-chain activity.
Published At
11/6/2023 10:19:08 PM
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