The price of Solana’s SOL experienced a 20% gain between September 28 and October 6. However, it is important to determine whether this rally is correlated with Bitcoin’s movement or driven by other factors. Prior to the price breakout, SOL faced a turbulent period after a U.S. court approved the sale of $1.3 billion in SOL from the bankrupt exchange FTX.
To ensure that the liquidation of FTX assets doesn’t burden the crypto market, the bankruptcy court demanded that the sale occur through an investment adviser in weekly batches according to specific rules. This intervention provided some confidence to the market, and SOL reestablished the $20 support on September 29. Additionally, a successful upgrade to version 1.16 boosted SOL by 16% over the next seven days.
SOL’s rally was fueled by the growth of decentralized applications (DApps) and increased nonfungible token (NFT) volumes on Solana. The cryptocurrency is now attempting to establish a $23 support level and consolidate its position as the fifth-largest cryptocurrency by market capitalization, surpassing ADA’s $9.22 billion.
When analyzing networks focused on DApp execution, it is crucial to consider the number of active users. The number of addresses involved with smart contracts serves as a proxy for the number of users. Solana experienced an increase in activity across all sectors, including NFT marketplaces, decentralized finance, collectibles, social, and gaming. Furthermore, Solana’s active addresses engaging with DApps exceeded Ethereum’s active addresses during the same period.
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Solana has gained traction in the NFT market due to its cost-efficient and scalable solution. Data compression and off-chain storage allow for larger production quantities with lower minting fees, enabling creators to reach wider audiences. Over the past seven days, the Solana network surpassed Polygon in NFT sales, accumulating $6.8 million in value.
A significant driver behind SOL’s recent price gains was the network upgrade to version 1.16. This upgrade introduced a “gate system” to ensure the gradual activation of new features on the network, enhancing stability. It also implemented “confidential transfers” that use zero-knowledge proofs to encrypt transaction details, enhancing user privacy. Additionally, the upgrade improved RAM usage for validators, resizable data accounts, and included a mechanism to identify corrupted data. Overall, this upgrade brings improved efficiency, privacy, and security to the Solana blockchain.
Despite Solana’s progress, Ethereum layer-2 solutions have gained more traction in terms of total value locked (TVL) and activity. For example, Arbitrum holds $1.73 billion in TVL, and Optimism holds another $637 million, while Solana only has $326 million. This competition from Ethereum layer-2 solutions, combined with other external factors, makes it harder for Solana to breach the $23 resistance level.
Ultimately, investors remain focused on the Ethereum ecosystem due to its leadership in terms of developers and consolidated decentralized applications.
It is important to note that this article is for general information purposes and should not be taken as legal or investment advice. The views expressed here are the author’s alone and do not necessarily reflect the views of Cointelegraph.
