Solana’s native token, SOL, has experienced a significant surge in value, reaching its highest point in nearly two years on March 1. Currently, SOL is trading up 34.5% in just one week. While SOL remains the fourth-largest cryptocurrency, excluding stablecoins, it has been closing the gap with the third-place competitor, BNB. The question now is what has fueled SOL’s rally, and can it maintain this outperformance compared to its competitors?
SOL’s price had been attempting to stabilize around the $100 mark for the past couple of months. Therefore, it would be incorrect to say that the bull run started before February 23. In reality, SOL only experienced a modest 2% increase between December 23, 2023, and February 23, 2024. During the same period, Ether saw a 25.5% increase, and Tron achieved gains of 31.5%. Whatever triggered the decoupling in favor of SOL occurred within the past week.
In addition to the significant gains on SOL, several Solana SPL memecoins have seen a surge in demand in the past week. For example, Bonk recorded a 110% increase since February 23, while DogWifHat (WIF) experienced a significant rally of 250% during the same period. It is worth noting that this trend was not limited to Solana network tokens alone, as Dogecoin and Shiba Inu also registered gains of around 51% since February 23. However, it is likely that some of this demand spilled over from these popular tokens, impacting SOL as traders sought gains on decentralized exchange (DEX) listings.
A report published in The New York Times on February 27 claimed that Sam “SBF” Bankman-Fried, the convicted former CEO of the failed FTX exchange, had reportedly recommended prison guards to invest in SOL. SBF was found guilty of seven counts of fraud and conspiracy in a trial that concluded on November 2, 2023. Although it is impossible to determine whether SBF’s opinion had any influence on SOL’s gains, the timing of the article’s publication raises the possibility.
To determine whether the recent surge in SOL’s price is driven by increased demand for the token beyond speculation, it is necessary to analyze Solana network metrics. SOL is required for various activities within the Solana ecosystem, such as DEX trading, staking solutions, non-fungible token (NFT) marketplaces, and other decentralized applications (DApps) like gambling, games, and social networks.
The total value locked (TVL) in Solana’s smart contracts can have an impact on SOL’s price. A higher TVL indicates increased user activity and demand for Solana-based DApps, which can potentially drive demand and positively influence the price.
Recent data from Solana reveals a significant achievement: Its TVL has reached the highest level since November 2022, standing at 40.7 million SOL. This represents a 30% increase year-to-date in 2024. In comparison, Ethereum’s TVL in ETH terms increased by 15% during the same period, and BNB Chain recorded a 12% uptick in BNB deposits since December 31, 2023. This highlights Solana’s success in attracting more activity for DApps compared to other platforms.
Further exploration of the impact of this TVL growth on the Solana network shows that certain DApps can effectively handle substantial volumes and a large user base without requiring significant deposits.
Solana’s notable surge is primarily centered around the OpenSea NFT marketplace, contributing to a significant weekly volume of $7.8 billion. Even when excluding this, other Solana DApps have experienced significant increases in volume. For example, the Jito staking solution saw a remarkable 102% surge in just one week, while the cross-chain liquidity exchange Saber experienced a noteworthy 130% increase in volume during the same period.
Solana’s success can be attributed in part to the struggles faced by other competing blockchains when dealing with sudden spikes in transactions. For instance, the Avalanche network experienced a block production halt on February 23 due to inscription-related issues. While Solana has faced its own challenges, such as a five-hour outage on February 6, acknowledging these problems reduces the negative impact and sheds light on the scalability challenges faced by the industry as a whole. However, network metrics show no evidence that the SOL token is reaching its peak.
Disclaimer: This article is for general information purposes only and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.