Solana (SOL) has experienced an impressive surge this week, with prices rising up to 40% to establish a new 2023 high at around $58. This marks the best weekly performance for Solana since January 2023, and several factors have contributed to these gains, including the overall uptrend in the cryptocurrency market, led by Bitcoin ETF euphoria and a growing appetite for risk.
Despite concerns over the daily selling of 250,000-750,000 SOL tokens by the FTX bankruptcy estate over the last two weeks, the limited impact of these sales, combined with the presence of vested or locked tokens and a weekly sale limit of $100 million, has transformed initial fears into investor enthusiasm.
The Delaware Bankruptcy Court had approved the sale of 55.75 million SOL tokens in September 2023. This move, in conjunction with the reassuring information about the limited impact of these sales, has apparently had a positive effect on investor sentiment.
In addition, specialized Solana-focused funds have witnessed significant inflows, totaling up to $10.80 million in the week ending Nov. 3. This is a relevant indicator that suggests growing institutional interest in the SOL market.
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Moreover, it is important to note that Bitcoin ETF euphoria has been a major contributing factor to the uptrend in cryptocurrency prices. Although Bitcoin has been making significant gains in recent weeks as it approaches $38,000, Solana has emerged as the best-performing cryptocurrency in the past 30 days.
Another indicator of the growing interest in Solana is the significant increase in Solana’s futures open interest, which reached levels of around $772 million on Nov. 11. This is the highest level since November 2021, when SOL’s price hit its record high of $260. High open interest levels imply a growing interest and potentially greater liquidity in the market.
This rising open interest occurs alongside increasing funding rates, which are fees paid by one side of perpetual contracts to the other every 8 hours. A positive funding rate typically suggests that longs (buyers) are dominant in the market, and earlier this week, SOL’s funding rate increased to 0.035% per eight hours. This rate represents a 0.735% weekly cost for leverage longs, indicating a strong bullish sentiment in the market.
Combined with a technical breakout in SOL’s price, as evidenced by a bullish move that broke above the horizontal trendline resistance of its ascending triangle channel two weeks ago, it seems that most derivatives traders anticipate the SOL price rally to continue further.
However, it’s worth noting that the weekly relative strength indicator (RSI) is now at its most overbought level since September 2021. As a result, there is a risk of correction, with a possible correction toward the triangle’s upper trendline near $30 on the table.
Overall, the outlook for Solana remains positive, with strong technical indicators and growing institutional interest driving its impressive performance in the market. However, as with any investment, readers are advised to conduct their own research and consider the risks involved before making any decisions.
