Solana Surpasses BNB in Market Cap Amid Rising Success but Sustainability Remains Uncertain
Summary:
Solana's native currency, SOL, witnessed an 18% increase in the week leading up to Feb 13, placing it third in market capitalisation, overtaking its competitor, BNB. However, despite the bullish run, trend sustainability beyond $110 hangs in balance due to Solana's activity levels relative to its market cap. The recent 5-hour Solana network outage, causing transaction suspensions, suggests potential risks, but the company's ability to implement rapid software upgrades could safeguard the SOL token's value.
In the week leading up to February 13, Solana's (SOL) native currency, SOL, saw a jump of 18%. The increase in price to $115 allowed Solana to outmatch its competitor BNB in terms of market capitalization, nabbing the third position, if stablecoins are not considered. Factors like airdrops and Solana network's ability to provide a more reasonable and user-friendly alternative to its competitors played a crucial role in SOL's surge. But whether these are enough to propel a surge past $120 will still be seen.
Veteran cryptocurrency investors often point out that the rollup solutions of the Ethereum network offer ample scalability and lower costs, keeping investors within the network. However, newcomers will probably find Solana's user interface less complicated. This is also evident in nonfungible token (NFT) launches and airdrop campaigns targeting more than 10,000 addresses. Due to increased costs or delays during high-demand periods, even layer-2 solutions struggle, history has shown us.
Despite a recent five-hour network outage on February 6, SOL was unscathed. This downtime led validators to undertake a coordinated software update and restart from a designated slot. During this period, transactions involving SOL and Solana SPL tokens were suspended on exchanges, posing a hurdle to users dealing with decentralized apps (DApps). In the last two years, the Solana network has undergone a dozen similar outages.
Despite this, Solana's advantage lies in its capacity to expedite software development. Faster updates and implementations can be made in Solana compared to Ethereum Virtual Machine (EVM) compatible networks. This allows developers in Solana to create, trial, and enforce new validation software solutions in a matter of hours, compared to years on Ethereum mainnet, protecting the SOL token from possible effects of network downtime.
Whether the bullish trend will continue to fuel SOL's price depends largely on broader crypto market movements and Bitcoin (BTC) prices, which SOL usually mirrors. To assess the sustainability of SOL's surge beyond $110, one needs to study the activity levels of the Solana network, a key determinant of SOL demand.
According to DappRadar, a preliminary analysis of DApps activity over the past week reveals a concerning 29% drop in active addresses and an insignificant 4% rise in volumes for the Solana network. On the other hand, BNB Chain and Polygon witnessed almost a 30% surge in DApps volumes. So, given that SOL and BNB tokens have comparable market capitalization, should investors be worried about Solana's much lower activity levels?
While this does not suggest any abrupt SOL price correction, the sustainability of a move past $120 and the resultant $52.5 billion valuation in the medium to long terms is uncertain. However, SOL supporters stand by the network's potential, as indicated by the 91.4 million transactions processed in the past week alone. If the DApps activity level escalates, regardless of whether it is airdrop-driven or not, this could tip the scale in favor of a continued SOL bull run. This is not investment advice and all trading and investment endeavors bear risks. Readers should do thorough research before making any decisions.
Published At
2/13/2024 11:17:01 PM
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