Source: Cointelegraph
Original: “Solana Network and DeFi Activity Suggest SOL Price Rally Will Continue”
Key Points:
The native token of Solana, SOL, rose by 24.8% from May 6 to May 10, following a broader recovery trend in the altcoin market after Bitcoin broke the $100,000 mark. Since then, SOL has struggled to maintain the $180 level, but derivatives and on-chain data still indicate potential for further upside.
SOL/USD (blue) compared to altcoin market capitalization. Source: TradingView / Cointelegraph
Despite being the fifth largest cryptocurrency by market capitalization, Solana ranks second in key on-chain metrics, including Total Value Locked (TVL).
Blockchains ranked by TVL in USD. Source: DefiLlama
Solana's total locked value (TVL) of $10.9 billion has surpassed the entire Ethereum Layer-2 ecosystem, including Base, Arbitrum, and Optimism. Even the BNB Chain, which is seamlessly integrated with Binance and Trust Wallet, cannot match Solana's performance data. Projects on Solana that have seen significant TVL growth in the past 30 days include the Raydium decentralized exchange (up 78%), Jito liquid staking solution (up 41%), and Marinade (up 56%).
Gaining traction in decentralized finance (DeFi) does not always translate to demand for the native token, as some networks have very low transaction fees. For instance, according to DefiLlama, the Ethereum network generated only $24.9 million in fees over the past 30 days, while the Tron network reached $51.9 million, and Solana totaled $43.3 million.
Solana network DApp revenue (left) and on-chain fees (right). Source: DefiLlama
Solana's DApp revenue and on-chain fees have shown steady growth over the past four weeks. The latest data is approaching a three-month high, which is very favorable for SOL as it directly drives market demand. With 65% of SOL supply participating in staking, this dynamic also strongly supports the upward price momentum.
To assess whether traders have become more optimistic about SOL's price prospects, observing leverage demand is an effective method. A positive funding rate indicates that bulls (buyers) are paying fees to keep their positions open.
SOL perpetual futures annualized funding rate. Source: Laevitas.ch
Currently, the SOL perpetual futures funding rate is at 8%, which falls within the neutral range of 5% to 10%, based on capital costs. However, since SOL is still 40% lower than its all-time high of $295 set on January 19, the current excessive optimism is not well-founded. Nevertheless, the increasing activity on the Solana network suggests that SOL may soon break the $200 mark, with potential to surpass its competitors.
The exact catalysts driving SOL's price increase remain unclear, but they may include the possibility of the U.S. approving a spot Solana exchange-traded fund (ETF) and Solana eventually being included in a national digital asset strategic reserve. Additionally, some analysts are optimistic about the prospects of tokenizing traditional assets on Solana, which could unlock more value potential for SOL.
Related: What’s Next for the U.S. Stablecoin Bill?
This article is for general informational purposes only and should not be considered legal or investment advice. The views, thoughts, and opinions expressed in this article are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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