Solana gained 2% during the market downturn. Is it possible to reach $200?
Solana's (SOL) native token, SOL, gained 2% on March 14, although it did not sustain the $173 level. Remarkably, this move occurred during a 4% decline in the broader cryptocurrency market. Currently priced at $164, SOL has seen an impressive 36% gain since March 5, prompting investors to wonder if the reasons for a bull run to $200 still exist.
Crypto regulation and US inflation data temporarily halted SOL activity.
The decline in the crypto market was partly due to a warning from the Hong Kong Securities and Futures Commission (SFC) on March 14. The announcement states that the Baybit exchange is not authorized to offer credit and derivative products locally. As the second largest derivatives exchange, Bybit has $15.1 billion in open interest, according to CoinGlass.
Additionally, the latest US Department of Labor's Producer Price Index (PPI) report, which measures the average price change that domestic producers receive for their goods and services, weighed on investor sentiment. PPI rose 0.6% from January to February, reducing the likelihood of an interest rate cut by the US Federal Reserve on March 20.
The introduction of reduced gas fees on Ethereum Denkun update on March 13 may have hindered SOL activity. Analysts say that at Base, an Ethereum (ETH) Layer-2 decentralized exchange, they are now much cheaper than Solana.
For example, on March 14, the fee for switching on Solana's DEX reached $0.37, while the corresponding transaction on Base's DEX was $0.02. However, despite Ethereum's upgrade, there is a lot of excitement around Solana Memcoins and airdrops like Dogwhiphat, Bonk, and Jupiter (JUP).
A significant boost for Solana's SPL tokens came when Coinbase, a major US exchange, created a “How to Buy Geo Boden (BODEN)” webpage, directing readers to CoinMarketCap for details. This particular mention was highlighted by Joe Weisenthal on March 13, and the post on the X social network has reportedly received over 621,300 views.
In addition to the excitement over the upcoming Airdrops, this trend has led to a significant increase in the use of Solana's decentralized applications (DApps).
Data from the past seven days shows that Solana has seen a 13 percent increase in total value locked (TVL) and a 24 percent increase in DApp volumes. On the other hand, Ethereum, the leading blockchain, showed a slight decrease in TVL but an 11% increase in DApp volumes. However, in absolute TVL figures, Solana is still behind BNB Chain and Arbitrum, which have $3.5 billion and $2.6 billion in deposits respectively.
Demand for high-use SOL spaces is relatively high.
It is important to examine the demand for leverage in the futures markets to gauge whether traders are optimistic after SOL reached its highest price in over two years. The perpetual contract (reverse swap) includes a funding rate that aims to balance any potential difference in demand.
Related: Why is Solana (SOL) price up today?
A positive funding rate indicates strong demand from long position holders and prices above 0.10% in an 8-hour period, which equates to 2.1% per week, are generally considered excessive and unsustainable. Therefore, the current SOL funding rate of 0.05% is somewhat expensive for those who run long positions, but it is not unusual in market conditions.
Despite concerns about its centralization or stability compared to Ethereum, activity on the Solana network continues to grow. SPL tokens have definitely made a splash with multiple listings on major central exchanges. This encouraged investors to buy SOL tokens to participate in several climate programs, which seems to be able to reach the target price of $200.
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.
