Solana, a blockchain platform known for its fast transaction speeds and low fees, has seen two positive developments recently. The first is the launch of the Saga Android-based smartphone, which is powered by the Solana blockchain. The smartphone has received positive reviews for its user experience and quality, although it is currently priced at over $1,000 apiece, which some analysts consider overpriced. The second development is the retail trading debut of Grayscale Solana Trust shares, which is unlikely to have a significant impact on the price of SOL due to its low asset under management.
Despite these positive developments, there are warning signs of a lack of growth across on-chain metrics and bullishness across the derivatives market, which could lead to a steep correction.
NFTs Carry the Solana Ecosystem
One area where Solana has seen sustained growth is in the trading of nonfungible tokens (NFTs). According to a report by Delphi Digital, the Solana NFT ecosystem has grown from 6% to 14% of total NFT sales volume in less than a year by February 2023, becoming the second-largest NFT ecosystem after Ethereum.
However, NFT trading volumes on Solana marketplaces have declined since February 2023, which is a discouraging sign. Additionally, the smart money activity has also compressed significantly, with fewer spending and gains made by “smart money” wallets. It remains to be seen how the Solana ecosystem will sustain the growth of its NFT trading volumes.
Solana Price Action
The open interest (OI) volume for SOL futures, which represents the number of open positions for SOL contracts, surged toward a 2023 high with a spike from $239 million to $365 million in the 48-hours following April 11. The rise in SOL’s price coincides with the OI volume surge, suggesting that derivatives volumes are driving the latest uptrend.
The rise in OI volumes also accompanies a surge in the funding rates for perpetual swap contracts, suggesting that leverage traders are bullish on the coin. This is a bearish contrarian signal, as the market usually runs the stops of crowded perpetual orders.
The SOL/USD pair faces resistance from the 50-day exponential moving average at $25.40 and the 2022 breakdown levels around $29.76. The moving average convergence/divergence (MACD) indicator, a momentum indicator, shows a divergence between the price surge and the MACD indicator, hinting at a possible pullback. Support for the pair lies around the $20 level.
Conclusion
While Solana has had some positive developments recently, including the launch of the Saga smartphone and the retail trading debut of Grayscale Solana Trust shares, there are also warning signs of lack of growth across on-chain metrics and bullishness across the derivatives market. The growth of Solana’s NFT trading volumes has been impressive but has also declined since February 2023. The rise in OI volumes and funding rates for perpetual swap contracts may suggest that derivatives volumes are currently driving the latest uptrend. Overall, investors should conduct their own research before making any investment decisions in Solana.
