3 reasons why the price of Solana (SOL) increased this week
Solana's SOL (SOL) price surged 20% between September 28 and October 6, but is the rally a coordinated move with Bitcoin (BTC) or is it driven by other factors? Before the price loss – or perhaps the recovery – SOL faced turmoil after a US court approved the $1.3 billion sale of SOL from bankrupt FTX.
The bankruptcy court has taken steps to make the liquidation of FTX assets less burdensome for the crypto market, requiring that the sale be done in weekly batches through an investment advisor, according to pre-set rules.
Following an initial impact on September 11 that sent SOL prices down to a two-month low of $17.34, some confidence among bulls appeared as it reestablished $20 support on September 29. A successful upgrade to version 1.16 will increase SOL by 16% over the next seven days.
SOL's rally is fueled by growth in the use of decentralized applications (DApps) and increased volumes of non-fungible tokens (NFT) on Solana. The price of SOL is now trying to establish support at $23 and make it the fifth largest cryptocurrency by market capitalization (excluding stablecoins) at $9.22 billion.
Solana DApp and NFT market activity is increasing.
When analyzing networks focused on DApp performance, the number of active users should be a priority. Therefore, one should start by counting the addresses included with the smart contracts, which serve as a proxy for the number of users.
Note that the increase in activity is consistent across all sectors, including NFT marketplaces, decentralized finance, aggregators, social and gaming. In addition, Solana's active addresses for DApps surpassed Ethereum's during the same period, which accounted for 55,230.
Solana is a cost-effective and scalable solution that is gaining high demand in the NFT market, as the data is compact and stored off-chain. This allows for more viable production on a smaller scale, allowing creators to reach a wider audience as they require less artistic fees.
According to CryptoSlam, over the past seven days, the Solana network has surpassed Polygon, accumulating $6.8 million in NFT sales. In September, the situation changed, Solana received a total of 23.9 million dollars, the Polygon network received 31 million dollars in NFT sales.
Network optimization improves privacy and eases stress on verifiers
The driver behind SOL's recent 20% price gains was the September 28 update to version 1.16, which introduced a “gate system” to ensure gradual activation of new features on the network. This process helps maintain network stability and prevents problems caused by sudden changes.
Another significant change in this update is “Confidential Transfers”, which enhances user privacy by encrypting transaction details. The release also includes improvements to RAM usage for validators, dynamic data tags, and a method to detect corrupted data.
Overall, this update brings improved efficiency, privacy, and security to the Solana blockchain, a major milestone in its development.
Strong competition from Ethereum layer-2 solutions
Despite Solana's competition with other blockchain networks, there is no doubt that Ethereum's layer-2 solutions have gained more attention in terms of Total Value Locked (TVL) and activity. For example, Arbitrum accounts for $1.73 billion in TVL, and Optimism accounts for another $637 million, according to Defillama—both significantly more than Solana's $326 million.
As Solana continues to improve in privacy, scalability and security, external factors beyond the FTX loss drama are at play, making $23 resistance harder to breach than anticipated.
Ultimately, investors will focus largely on the Ethereum ecosystem as it remains a leader in developers and decentralized applications.
This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
