Solana (SOL) price gathers 19% in a week – is $120 the next stop?
Solana's native token, SOL, gained 18% in the 7 days leading up to February 13. The price ran to $115, allowing Solana to pass its competitor BNB (BNB) in market capitalization, without adding a stable coin to claim the third place.
The driving force behind SOL's bull run includes airdrops and network capabilities to provide a more affordable and user-friendly solution compared to its competitors. However, are these factors enough to justify the rally to $120 and above?
Experienced crypto investors argue that the Ethereum network's bundled solutions are scalable and cost-effective enough to keep investors on the network. History shows that even layer-2 solutions that target 10,000 or more addresses experience high transaction costs or delays during periods of high demand, similar to non-vulnerable token (NFT) launches and airdrops.
SOL was not affected by Solana's recent network outage.
Solana was not immune to the outage, and the network experienced a 5-hour downtime on February 6, prompting controllers to coordinate a software update and restart from a specific slot. Exchanges have stopped depositing and withdrawing SOL and Solana SPL tokens, allowing users to interact with decentralized applications (DApps). Solana's network has experienced twelve similar outages in the past two years.
On the positive side, by closely coordinating software development, Solana can upgrade and implement improvements faster than Ethereum Virtual Machine (EVM) compatible networks. While Solana developers take a few hours to develop, test, and implement a new proof-of-concept software solution, the same effort can take years on the Ethereum mainnet. This difference explains why the SOL token was not affected by the recent network outage.
How much does the bull market use the SOL price?
The price of SOL tends to track the price of Bitcoin (BTC) and the broader crypto market trends. However, to determine if SOL's rally above $110 is sustainable, one must gauge the activity of the Solana Network, which is typically the leading driver of SOL demand.
Related: Solana Market Overtakes BNB, Secures 4th Place
The initial analysis of the activity of DApps is not favorable for the Solana network, as the data of the last 7 days shows a contraction of 29% in the number of addresses and an increase of 4%. In contrast, BNB Chain and Polygon saw a nearly 30% increase in DApps volumes, Dapradar noted. In absolute terms, SOL and BNB tokens hold similar market capitalizations, so Solana's activity is much lower than BNB Chain, but should this be a concern for investors?
Although the data does not suggest any risk of a SOL price correction, the path above $120 and the $52.5 billion valuation raises questions about whether it is sustainable in the medium to long term. SOL bulls are dependent on the network's capacity, as evidenced by the 91.4 million transactions that took place in the last week alone, which could be the deciding factor if DApps activity takes off, whether driven by airdrops or not.
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.
