Solana price is shaky, but increased DApp activity points to SOL recovery
Solana's native token, SOL (SOL), experienced a 45% increase in the week, hitting a high of $210 on March 18. Although the price of SOL did not reach the all-time high of $260 in November 2021, it gained 58%. The last 30 days. This performance outperformed Ether (ETH) and Avalanche's AVAX (AVAX), which increased by 12% and 30%, respectively, during the same period.
Solana is the fifth largest cryptocurrency by market capitalization and third by total value locked (TVL), making it difficult to support a long-term bearish view on SOL's price. However, this does not guarantee that the SOL price will stay above $165 in the short term, so investors should check the chain's indicators to see if the bullish trend can continue.
Solana sees a sudden increase in activity
The view that SOL's 18% decline since March 18 has reversed the bullish trend is challenged by the fact that SOL's price dipped below $165 on March 20, hitting major support in less than an hour. Both the bullish and bearish arguments have merit considering the altcoin season, with Bitcoin (BTC) unable to sustain above $70,000.
Critics point out that Solana's increased demand has led to relatively high fees and many failed transactions. In the year On March 16, data from Cointelegraph indicated that validators experienced delays of up to 40 seconds, causing nearly half of transactions to fail within a 20-minute period. This surge in activity was fueled by memecoin frenzy, especially during the Book of Meme (BOME) launch, which attracted an impressive trading volume of $270 million in the first 24 hours.
The competition between memecoin startups intensified after the Ethereum Dencun hard fork on March 13 reduced fees for layer-2 scalability solutions. As reported by Dapradar, this update led to an increase in Ethereum base activity, with decentralized application (DApp) volume increasing by 77% in a week. Therefore, the Ethereum ecosystem has become more competitive for memecoin startups, which may reduce the attention and costs of Solana users.
Solana memecoin started to decline after Ethereum updated its denk.
Although it is challenging to identify the direct cause and effect, Solana SPL memecoins seem to have peaked the day after the Ethereum network update on March 14th. Despite these setbacks, the Solana network has benefited greatly from the increased activity, with both increased volume and active addresses engaging with DApps.
As of March 13, Solana's network volume has increased by 55%, significantly outpacing competitors such as BNB Chain and Polygon, which have gained 2% and 7%, respectively, over the same period. However, the increased activity and volume from memecoins and new token launches does not guarantee continued price increases, regardless of the merits of the project.
Related: How Low Can Bitcoin Price Go?
This was evident in liquid staking project Jito (Jito), which saw a 20% drop in two days after reaching a high of $3.85 on March 18. -Time high $1.60 same day. Despite the adoption rate of these projects, the decline in SOL prices affects the entire Solana ecosystem.
Analysts suggest that token issuance is a major concern in order to cover Solana's substantial verification costs and effectively simplify SOL's offering. Additionally, the large amount of tokens held by the bankrupt FTX exchange poses a risk of being sold in the near future. Despite these factors, the growth of Solana's DApp activity does not indicate any weakness, indicating that the $165 support level should hold in the near term.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
