Solana worth hits a brand new 2023 excessive — What’s behind the SOL rally?


Solana’s native token, SOL (SOL), skilled a powerful 22% surge on Nov. 10, breaking previous the $54 mark for the primary time since Could 2022. Notably, this surge occurred amid the continual selling of SOL tokens by FTX’s bankruptcy estate. The Delaware Chapter Court docket accredited the sale of the failed alternate’s property, which included 55.75 million SOL, in September 2023.

Investor enthusiasm for SOL’s worth enhance could also be attributed to the truth that a few of the tokens from the chapter proceedings are both vested or locked. Moreover, there’s a weekly sale limit of $100 million imposed as a part of the FTX liquidation plan. In essence, the preliminary concern of asset liquidation has reworked into hope as buyers understand the restricted influence of the gross sales.

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As dealer and unbiased analyst Bluntz aptly described the state of affairs, SOL’s resilience throughout the FTX chapter token dump is spectacular. The publish on X (previously Twitter) provides a bullish case for SOL, stating:

“As soon as this vendor is gone, I can solely think about how onerous it’s gonna pump.”

SOL worth has been fueled by stable demand for leverage longs

SOL’s substantial 39% weekly good points have pushed its futures open curiosity to $745 million, the very best degree since November 2021, when SOL achieved its all-time excessive of $260. Nonetheless, in futures markets, leverage longs and shorts are continuously matched, so it’s essential to look at SOL’s funding fee for a extra nuanced perspective.

A constructive funding fee signifies that longs (consumers) demand extra leverage, whereas the other happens when shorts (sellers) require extra leverage, leading to a destructive funding fee.

SOL futures common funding fee, 8-hour. Supply: CoinGlass

SOL’s present futures funding fee represents a 0.5% weekly price for leverage longs, which isn’t extreme given the prevailing bullish momentum. But, this can be a vital shift from the funding fee ranges noticed three weeks earlier when leverage shorts had been paying for leverage use.

Whereas it might be argued that derivatives markets primarily drove SOL’s rally, there’s stable proof indicating progress when it comes to deposits and the utilization of decentralized functions (DApps) throughout the Solana ecosystem.

Past derivatives, Solana’s ecosystem reveals stable progress

Solana’s complete worth locked (TVL), which measures the quantity deposited in its good contracts, has reversed its declining development after six consecutive weeks.

Solana community complete worth locked in SOL phrases. Supply: DefiLlama

Solana’s DApps deposits have seen a ten% enhance within the final three days. Whereas the present 11.1 million SOL degree continues to be under the 30 million SOL previous to the FTX alternate chapter, this current development means that the worst interval for the Solana community could also be behind us.

it’sTo affirm that this motion is not solely pushed by a couple of massive holders inflating TVL, it is important to investigate the variety of customers using energetic addresses as a proxy.

Complete DeFi energetic handle in 30 days. Supply: DappRadar

Solana now ranks because the fourth-largest blockchain in decentralized finance (DeFi) TVL, accompanied by a 28% progress within the variety of energetic addresses. Curiously, this surge in exercise occurred whereas opponents skilled declines, with market chief Ethereum going through a 22% drop in DeFi energetic customers, in response to DappRadar.

Associated: 3 theses that will drive Ethereum and Bitcoin in the next bull market

On the one hand, SOL token bulls profit from the elevated community exercise and better TVL. Alternatively, Solana’s present market capitalization of $22.8 billion has surpassed Polygon’s $7.8 billion by practically threefold, regardless of each networks having comparable DeFi TVL. This has prompted buyers to query the sustainability of SOL’s bull run above $54.

Moreover, Solana protocol’s amassed 30-day charges amounted to $1.9 million, in comparison with Polygon’s $1.6 million, in response to DefiLlama. Nevertheless, these figures pale in comparison with BNB Chain’s $9.1 million, elevating doubts in regards to the valuation after SOL’s current rally.

As of now, there is no such thing as a evident cause to guess towards the development, as there is no such thing as a extreme leverage demand noticed in SOL derivatives contracts. Nonetheless, the basics trace at restricted room for additional upside.