Solana Hits $63: What Comes Next?

Since October 15, SOL has surged by 150%, and the project's market cap has surpassed $24 billion. Presently, the asset is ranked 7th among cryptocurrencies by Coingecko, overtaking projects like Cardano, Polygon, and Tron, among others.

Let's explore the reasons behind SOL's dramatic rise and assess whether it's still opportune to invest in the asset on the spot market.

Bitcoin: The Catalyst for the Local Altcoin Season

In just a month, Bitcoin has risen from $26,000 to $38,000, triggering a local altcoin season. It's not just Solana that has shown robust performance – in the last week, the coins of projects like Cronos, Chainlink, Kasta, and ImmutableX have increased by 50-60%.

Overlaying the cryptocurrency charts for SOL and BTC, there is a noticeable high correlation between these assets. The key difference is that SOL has achieved better performance in terms of percentage gains. 

Correlation between SOL and BTC. Source: tradingview.com

Looking at the SOL/BTC cryptocurrency pair, one can also see Solana's dominance as illustrated by a two-month upward trend.

Chart of the SOL/BTC trading pair. Source: tradingview.com

Overall Blockchain Statistics

As per the blockchain explorer Solscan, the number of circulating SOL coins stands at 421,166,520. The network is supported by 2,042 validators, with an average throughput exceeding 4,300 transactions per second.

General Characteristics of the Solana Blockchain. Source: solscan.io

The trading volumes of SOL and other tokens within the network are on the rise, but this growth is uneven, marked by certain spikes (like on October 22, and November 1, 10-11):

Trade Volume Dynamics on DEXs. Source solscan.io

The network's throughput hasn't seen any substantial increase in the past few days and has even slightly decreased, remaining below 4,700 TPS. This indicates no abnormal spike in DeFi user activity.

TPS Metrics in the Solana Network. Source: solscan.io

The total number of transactions in the network also remains relatively close to average figures:

Number of Transactions in the Solana Network. Source: solscan.io

Concurrently, the rise in new and active accounts aligns proportionately with the DEX trading volume, exhibiting wave-like trends on certain days:

Old and New Wallet Activity in the Solana Network. Source: solscan.io

In conclusion, the Solana blockchain hasn't experienced any sharp uptick in activity, suggesting that the slight 10-15% increase is probably a direct result of the asset's price growth.

Positive News 

Solana has overcome the peak of market FUD, highlighted by news of the bankrupt FTX exchange holding over $1 billion in SOL tokens. The market digested this setback smoothly, and even the token sales involved in FTX’s legal case didn't plummet SOL's price.

Following this, the news landscape around Solana began to stabilize and even shifted to a more positive tone. For instance, Solana Labs recently initiated an incubator to draw startups to its blockchain platform, aiming to entice developers from other blockchains. Activities include a hackathon and an accelerator program for projects in AI development.

The company also continues to form significant partnerships with other projects. In late September, Visa integrated USDC stablecoin payments via the Solana blockchain, and shortly afterward, Solana Pay was incorporated into Shopify.

An additional contributing factor to the network's rising popularity is the increased transaction fees in EVM networks. While Ethereum's Gwei was around 8-12 during the summer, it has now escalated to over 30+. These elevated fees have made users hesitant to use the Ethereum network, positioning Solana as an appealing alternative. 

Solana’s TVL Increases Slower Than Its Price

Data from the analytical resource DeFiLlama shows that the Total Value Locked (TVL) in the Solana network is currently $538 million. Solscan reports this figure at $215 million, but it does not account for many decentralized applications. 

Solana TVL. Source: defillama.com

More crucial than the absolute figure of the locked funds is the rate of increase. While the SOL cryptocurrency's price soared by 150% in three weeks, the TVL only saw a 75% rise. Since roughly half of the funds in DeFi protocols are locked in SOL coins, the rise in the dollar equivalent of TVL could be simply attributed to the increase in SOL's price.

This trend suggests that DeFi user activity has not grown significantly, and the price increase in SOL is primarily driven by retail investors.

Is it a Good Time to Invest in SOL?

The all-time high for the cryptocurrency is at $260, and the asset is currently far from reaching this level. A similar situation is observed with the TVL indicator: its all-time high was $10 billion, which is 20 times greater than the present figures. This disparity suggests room for further growth in SOL's price, but this would require an increase in activity within the DeFi sector, not solely from speculative investors.

Additionally, it's worthwhile to pay attention to tokens within the Solana ecosystem related to decentralized exchanges, lending protocols, NFT projects, and others. When the SOL price is stagnant, these assets can demonstrate significant growth, offering greater short-term potential than the main SOL coin.

Regarding the overall uptrend, it's expected to persist as long as there's a rise in Bitcoin (BTC).