Solana's Performance in Question Despite Ecosystem Growth and Market Pressure
Summary:
Solana's native token, SOL, has seen a 10.7% drop in 30 days, leading investors to question SOL's underperformance despite solid network fundamentals. The cryptocurrency market as a whole has faced pressure due to the U.S. Federal Reserve's decision to maintain interest rates. Despite fears of a crisis in U.S. regional banks and their potential impact on Bitcoin, BitMEX co-founder Arthur Hayes suggests the aftermath could actually benefit cryptocurrencies. Despite falling prices, Solana's ecosystem has seen a surge in demand, including the successful launch of the Jupiter decentralized exchange aggregator. Nevertheless, whether or not SOL can exceed its current $104 resistance point and surpass competitor BNB's valuation remains uncertain.
The native token of Solana (SOL), SOL, observed a fall of nearly 10% from January 30 to February 1, not managing to exceed the resistance level of $104 for a fifth time in a month. In a broader 30-day span, SOL displayed a drop of 10.7%, while Ethereum (ETH) and BNB (BNB) reflected a decrement of 1.2% and 2.6% respectively in the same period. This has initiated doubts among investors about SOL's poor performance despite its robust network fundamentals.
The overall cryptocurrency market has been unsettled following the decision of the U.S Federal Reserve (Fed) on January 31 leaving interest rates unaltered at 5.25%. The central monetary authority also indicated that the target range would stay the same until there's a stronger assurance of inflation sustainably heading towards 2%.
The looming crisis with regional banks in the U.S poses a major risk, as they are heavily burdened due to their fixed-income portfolios yielding below the existing interest rate. This is reflected in the 42% decrease in shares of New York Community Bancorp, the buyer of the failed crypto-friendly Signature Bank in 2023, since January 30; mainly due to its $260 million loss in Q4 2023.
With both Arthur Hayes, BitMEX co-founder, and investors showing concern about this contagious risk, an immediate reaction of Bitcoin drop is likely if the Fed doesn't approve of a swift bailout; however, it might eventually benefit cryptocurrencies, as investors might foresee higher inflation.
The query about SOL's price downward movement can be answered by considering the $104 resistance point, which might be influenced by factors beyond Solana's ecosystem. With a $45 billion market cap at $104, Solana has a similar valuation as BNB, its immediate competitor. But, BNB chain's total locked value is over twice that of Solana's.
Solana's decentralized applications have less activity than that of BNB Chain’s. BNB Chain's total addresses communicating with DApps was 3.3 million in 30 days, considerably more than Solana's 2.65 million. Moreover, BNB Chain's DApps 30-day volume was a significant $20.8 billion, quite larger than Solana's $2.75 million.
Despite such comparisons, the launch of the Jupiter decentralized exchange aggregator was a successful event, with the Jupiter airdrop having a current market cap of $800 million. Over 438,000 addresses have claimed their airdrop. Along with Jupiter's progress, demand has surged in Solana's ecosystem over the past week, with a few of their DApps witnessing substantial user growth.
Whether SOL can surpass the $104 level and go beyond BNB's valuation is yet to be seen. Solana still has a long way, needing to establish its capacity among the top 3 networks in terms of total locked value and volumes.
Published At
2/1/2024 11:12:36 PM
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