Background of the Rally
On November 10, Solana’s native token, SOL, soared impressively by 22%, surpassing the $54 threshold for the first time since May 2022. This spike is especially noteworthy considering the backdrop of FTX’s bankruptcy proceedings, during which 55.75 million SOL tokens were up for sale.
Investor Sentiment: From Fear to Hope
Initially, investors were saturated with dread over potential asset liquidations, helmed by the continuous offloading of SOL tokens by FTX’s estate. However, as some of these tokens are either locked or vested and a sale limit of $100 million is in place, the narrative has shifted. Now, what was once an ominous cloud of fear has transformed into a glimmer of hope as the market begins to absorb these sales efficiently.
Daily Sales Under Pressure
Each day, FTX has been dumping between 250k and 700k SOL tokens, yet the market has exhibited impressive resilience, absorbing this supply like a sponge. At this rate, it’s anticipated that the remaining unlocked tokens will be gone in just a week.
Analyzing SOL’s Price Dynamics
Trader and analyst Bluntz characterized this resilience perfectly: “Once this seller is gone, I can only imagine how hard it’s gonna pump.” With a 39% increase in weekly gains, SOL has witnessed its futures open interest balloon to $745 million—the highest since its all-time high in November 2021.
Futures Market Insights
A quick examination of the futures market reveals that SOL’s current funding rate poses a 0.5% weekly cost for long traders, indicative of strong bullish momentum. This stands in stark contrast to the negative funding rates observed three weeks ago, leaving traders optimistic about SOL’s directional approach.
Beyond the Numbers: Ecosystem Growth
While derivatives trading is an exciting realm, the Solana ecosystem is showcasing tangible growth as well. After a consistent downturn, the Total Value Locked (TVL) metric in Solana has rebounded, clocking in a 10% increase in DApps deposits over just three days.
User Engagement Metrics
Examining user activity sheds light on the legitness of this growth. With a 28% increase in active DeFi addresses despite competitors faltering (looking at you, Ethereum), Solana solidifies its position as a promising blockchain choice for finance aficionados.
Market Cap Dynamics and Future Sustainability
Despite SOL’s impressive market cap of $22.8 billion tripling Polygon’s sitting at $7.8 billion, worries linger about the sustainability of SOL’s bullish ascent. Interestingly, Solana’s accumulated fees over 30 days, at $1.9 million, outshined Polygon’s $1.6 million but still fell short compared to BNB Chain’s $9.1 million.
Conclusion: The Path Ahead
With no surplus leverage demand in SOL derivatives contracts and a promising trend in network activity, betting against SOL seems ill-advised at this juncture. However, it’s wise to understand that despite the jubilant atmosphere, the fundamentals might suggest limited room for a further uptick.
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