Solana’s native token, SOL, has experienced an impressive surge of 45% in just one week, reaching a high of $210 on March 18. While it hasn’t quite reached its all-time high of $260 from November 2021, SOL has still gained 58% over the past 30 days. This performance has surpassed that of Ether (ETH) and Avalanche’s AVAX, which have only increased by 12% and 30% respectively during the same period.
Solana continues to maintain its position as the fifth-largest cryptocurrency by market capitalization and the third-largest in terms of total value locked (TVL). This makes it difficult to support a long-term bearish outlook on SOL’s price. However, it’s important to note that there are no guarantees that SOL’s price will stay above $165 in the short term. Investors should carefully examine on-chain metrics to determine if the bullish trend is likely to continue.
Despite the recent 18% drop in SOL’s price since March 18, it’s not accurate to say that the bullish trend has been completely reversed. On March 20, SOL briefly dipped below $165 for less than an hour, demonstrating significant support at that level. With Bitcoin struggling to maintain a price above $70,000, there is speculation about an altcoin season, leading to arguments both in favor and against a bullish trend for SOL.
Critics of Solana point out that the increased demand for the network has resulted in higher fees and more failed transactions. On March 16, data from Cointelegraph showed that validators experienced delays of up to 40 seconds, causing nearly half of the transactions to fail within a 20-minute period. This surge in activity was largely driven by a memecoin frenzy, particularly the launch of Book of Meme (BOME), which generated an impressive $270 million in trading volume within its first 24 hours.
The launch of Ethereum’s Dencun hard fork on March 13, which reduced fees for its layer-2 scalability solutions, intensified competition among memecoin launches. This upgrade also led to a 77% increase in decentralized application (DApp) volume on Ethereum within a week, making it a more competitive ecosystem for memecoin launches. This shift in focus may have affected the spending power of Solana users.
It’s difficult to determine the exact cause and effect, but it appears that Solana SPL memecoins reached their peak the day after the Ethereum network’s upgrade. Tokens like Dogwifhat (WIF) and Bonk experienced significant drops of 38% and 40% respectively. Despite these setbacks, the Solana network has benefited from increased activity, with higher volume and active addresses engaging with its DApps.
The Solana network’s volume has surged by 55% since March 13, surpassing competitors like BNB Chain and Polygon, which have only seen gains of 2% and 7% respectively during the same period. However, it’s important to note that increased activity and volume from memecoins and new token launches don’t necessarily guarantee sustained price increases.
This is evident with projects like Jito (JTO) and Jupiter’s JUP token, which both experienced significant drops in price despite their level of adoption. A downturn in SOL’s price can impact the entire Solana ecosystem.
Analysts have raised concerns about the significant issuance of tokens to cover Solana’s validator costs, which effectively inflates the supply of SOL. Additionally, the large volume of tokens held by the bankrupt FTX exchange’s estate poses a risk of a sell-off in the near future. However, the growth in Solana’s DApp activity suggests that there are no apparent weaknesses, indicating that the $165 support level should hold in the near term.
Please note that this article does not provide investment advice or recommendations. Investing and trading involve risks, and readers should conduct their own research before making any decisions.