Solana Price Hits New 2023 High – What’s Behind SOL’s Rally?
Solana's native token, SOL (SOL), experienced an impressive 22% surge on November 10, surpassing the $54 mark for the first time since May 2022. Notably, this increase occurred while FTX's bankruptcy estate was selling SOL tokens. The Delaware Bankruptcy Court approved the sale of the failed exchange's assets in September 2023, including SOL 55.75 million.
Investors are eager for SOL's price increase as some of the tokens from the bankruptcy process are held or locked up. Additionally, there is a $100 million weekly sales limit as part of the FTX Liquidation Plan. Basically, initial fears of asset losses have turned to hope as investors realize the limited impact of the sell-off.
FTX has been trading between 250k-700k$SOL daily for the past 2 weeks with the price going higher or going sideways.
It's been sinking like a champ so far and their currently unlocked tokens should be depleted within a week.
Once this seller is gone… pic.twitter.com/AtnTqz3uxG
— Bluntz (@Bluntz_Capital) November 9, 2023
As trader and independent analyst Blutz rightly put it, SOL's resilience during the FTX Sanxer token dump is impressive. A post on X (formerly Twitter) adds a great deal to SOL;
“I can only imagine how difficult it will be once this seller is gone.”
SOL prices were driven by strong usage-long demand.
SOL's significant weekly gain of 39% lifted its futures to $745 million, the highest level since November 2021, when SOL will hit an all-time high of $260. Still, in the futures markets, the use of longs and shorts are consistently matched, so it is important to examine the SOL funding rate for an advanced perspective.
A positive funding rate indicates that longs (buyers) need more energy, while the opposite occurs when shorts (sellers) need more energy, resulting in a negative funding rate.
SOL's current futures funding rate represents a 0.5% weekly cost over the long term of the license, which is not excessive given the current bullish rate. However, this is a significant change from the levels seen three weeks ago when utility shorts paid for leverage.
While it can be argued that derivatives markets have primarily driven the SOL rally, there is strong evidence of the growth of deposits and the use of decentralized applications (DApps) in the Solana ecosystem.
Beyond origins, the Solana ecosystem shows strong growth
Solana's total value locked (TVL), which measures the amount invested in smart contracts, reversed its downward trend after six consecutive weeks.
Solana DApps deposits have seen a 10% increase in the last three days. While the current level of 11.1 million SOL is below the 30 million SOL before the FTX exchange loss, this latest trend suggests that the worst times for the Solana network may be behind us.
It is important to examine the number of users employing active addresses as proxies to ensure that this activity is not only driven by a few large owners who raise TVL.
Solana is now the fourth largest blockchain in decentralized finance (DeFi) TVL, with a 28 percent growth in the number of addresses. Interestingly, this increase in activity occurred at a time when competitors were experiencing declines, with market leader Ethereum dropping 22% in DeFi active users, Dapradar reported.
Related: 3 Things Driving Ethereum and Bitcoin in the Next Bull Market
On the one hand, SOL token bulls will benefit from increased network activity and higher TVL. On the other hand, Solana's current market capitalization of $22.8 billion is nearly triple that of Polygon's $7.8 billion, even though both networks have comparable DeFi TVL. This has investors questioning whether SOL's bull run above $54 is over.
In addition, Solana Protocol's accumulated 30-day payout reached $1.9 million, compared to Polygon's $1.6 million, according to Defillama. However, these figures pale in comparison to BNB Chain's $9.1 million, casting doubt on the valuation after SOL's recent rally.
Currently, there is no clear reason to compete with the trend as there is no over leveraged interest in SOL derivatives contracts. However, the basics hint that there is some room for further development.
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.
