Solana’s SOL experienced a significant 36.6% increase in value between October 30 and November 2, reaching a peak of $44.50, its highest point since August 2022. However, the failure to breach this mark resulted in a subsequent 10% correction down to $40 on November 6. This price movement has left many investors pondering whether the ecosystem growth and network activity support Solana’s present $16.9 billion market capitalization.
The peak in SOL’s value on November 2 coincided with the Solana Breakpoint 2023 global conference in Amsterdam, where the Solana Foundation unveiled the testnet launch of Firedancer, a new client aimed at enhancing speed, reliability, and reducing hardware requirements for validators.
Earlier in October, the Solana Foundation also announced the availability of its network dataset on Google Cloud BigQuery, enabling developers and companies to access archival data and analytical insights transparently and securely.
Furthermore, the Solana Foundation has maintained a consistent level of activity, including the approval of the v.1.16 update, introducing confidential transactions for SPL tokens on the Solana network using zero-knowledge proofs.
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Despite these positive developments, not all news has been favorable for Solana. For example, decentralized liquid staking protocol Lido Finance announced its decision to cease operations on the network, citing unsustainable financials and low fees.
The central question remains whether the on-chain activity and metrics related to decentralized applications (DApps) support the SOL price hike, prompting an analysis of how Solana’s on-chain data and ecosystem growth compare with its competitors.
Unfortunately, Solana’s primary DApp metric, the total value locked (TVL) in its smart contracts, reached its lowest level in over two years on November 5. Additionally, Solana’s DApp deposits experienced a significant 30% decrease in 30 days, raising concerns about the network’s activity.
In contrast to its competitors, Solana’s low fees and continued development have not translated into a large number of active users. Its largest decentralized exchange, Raydium, recorded only 17,380 active addresses in the past 30 days, and its most widely used game, Star Atlas, had 12,420 unique addresses during the same period. This lack of activity poses considerable risks to the network’s viability.
Furthermore, Solana’s DApp volume reached only $609 million in the last 30 days, significantly lower than its competitors, such as BNB Chain’s $11 billion, Polygon’s $5.3 billion, and Avalanche’s $727 million in volume. These concerns have led to criticisms regarding the need for Know Your Customer and Anti-Money Laundering requirements to become a network validator, raising questions about centralization and dissatisfaction among SOL tokenholders.
It is apparent that the on-chain activity contradicts the recent price surge of SOL and does not support further price increases, prompting caution among investors. Ultimately, the future trajectory of Solana’s SOL will depend on its ability to address these issues and improve its network activity and ecosystem growth.
This article is for general informational purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
