Solana's Soaring Streak: Assessing the 15% Dip from a 14-Month Peak

Nov 4, 2023 at 10:30 am
  • Solana experienced a near twofold increase in value in recent weeks, although it relinquished a portion of those gains on Thursday. 
  • Arthur Hayes, one of the co-founders of BitMex, revealed that he actively made purchases amidst the surge in activity.
  • Inflows of institutional capital into funds and an uptick in activity have provided substantial backing for the trend. However, there are certain indicators hinting that the upward momentum may come to a pause.The trend was bolstered by an influx of institutional funds and increased activity, but there are indications pointing towards a potential slowdown in the rally.

In 2023, the token's value has surged by more than four times its initial value of approximately $10. Solana (SOL) has witnessed a remarkable resurgence, experiencing a staggering 300% increase in value this year. This impressive turnaround has captured the attention of participants in the crypto market, especially considering that the coin was previously one of the hardest-hit assets during the bear market.

Reaching a 14-month peak at $46.60 early on a Wednesday, Solana now stands as the seventh-largest cryptocurrency by market capitalization, significantly surpassing its starting value of around $10 at the beginning of the year. This surge in momentum even garnered the interest of prominent crypto investor and BitMex exchange co-founder, Arthur Hayes, who announced his recent purchase of SOL on social media.

Despite a period of rapid growth over the past couple of weeks, SOL has experienced a slight setback, declining by approximately 15% from its Wednesday morning peak to its current value of $40. This successful run follows a period of uncertainty, as many questioned Solana's future in the wake of the collapse of Sam Bankman-Fried's FTX exchange and Alameda Research trading firm nearly a year ago. Both entities were significant investors in the Solana ecosystem.

What drove the surge in Solana (SOL) prices

According to David Shuttleworth, research partner at Anagram, the resurgence in price can be attributed to institutional interest and substantial inflows from large investment funds. This year, crypto funds holding SOL saw an influx of nearly $100 million, making it the second-largest amount after bitcoin (BTC). In contrast, Ether (ETH) funds experienced outflows of $125 million.

Shuttleworth also highlighted a recent increase in developer activity within the Solana network. Additionally, a recent upgrade has contributed to greater decentralization by reducing validator hardware requirements and enabling confidential transactions through zero-knowledge (ZK) technology, as reported by asset management firm 21Shares.

What lies ahead for the price of Solana (SOL)?

Despite these positive developments, there are indications that the rally may face a temporary pause. Derivatives traders with leveraged short positions on SOL, who bet on lower prices, saw almost $10 million in liquidations during the buying frenzy on Wednesday. According to CoinGlass data, this represents the highest amount in the past three months. Market observers often view the actions of traders forced to close directional bets as a potential signal of a local top or bottom for the price.

Solana Margin Calls (CoinGlass)Solana Margin Calls (CoinGlass)  

While there are promising signs of revitalization for the ecosystem, the total value locked (TVL) on the Solana network remains at $855 million, a significant decrease from $10 billion two years ago, according to DefiLlama data. Lookonchain also pointed out that the last two Novembers have not been favorable for SOL. This observation is attributed to the Solana Breakpoint conference, an annual event for the ecosystem that takes place in early November (this year's version is currently underway in Amsterdam), which has coincided with local price peaks.

Further analysis by Lookonchain's blockchain data reveals that FTX crypto wallets have sent a total of 2.1 million SOL, equivalent to roughly $90 million, to exchanges in the past 10 days, indicating the company's potential role as a seller amidst the price surge. The FTX estate, which held $1.16 billion worth of SOL as of late August, is reaping the benefits of the rising prices. The estate obtained authorization from the bankruptcy court in September to sell digital assets and enlisted asset investment firm Galaxy Digital to manage its holdings.

"Perhaps someone is driving up the price and selling," commented Lookonchain on the matter.

Read More: Galaxy Digital Sets Sights on European Crypto Expansion: Meet the New Captain of the Voyage

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