Solana is exploding right now after reaching a new all-time high and breaking into the top 10 cryptocurrencies in terms of market cap. In less than one month, SOL, its native token, gave close to 6x returns. While the rest of the market seems to either go sideways or steadily increase, Solana is simply breaking all records with its recent rally.
But what’s behind the rally? Is the hype real? Let’s find out!
As we all know, Solana is a blockchain network that claims to have solved the scalability issue and can do close to 65,000 transactions for dirt cheap fees. Its position as an “Ethereum-killer” is also due to its token-burning mechanism, which is a good addition for long-term tokenomics. Even though Ethereum has scaling solutions with its L2s, it still cannot seem to tackle the transaction fees and network congestion.
Ethereum Gas Fees
On the other hand, Solana is a fully functional blockchain that not only meets the user demand but also does it without taking any assistance from side chains or other layer 2 scaling solutions. The low fees comparison has been known for a long time, so it is not the underlying reason why Solana is heavily pumping right now.
The main reason behind is the NFT boom. We saw NFT marketplaces do billions in sales in August alone, and it got many people thinking about Ethereum’s high gas fees, which used to be commonplace for many major collectors. With retail taking interest, the gas fees is climbing even more, limiting thousands of users to access the marketplace in a frictionless manner.
Where do they go now? It is simple- Solana NFT marketplace. Even though most of the NFTs on Solano are duplicate versions, there are still quite a few projects taking control of the NFT scene right now. We saw Degen Apes surprise everyone, and the Aurory gaming project crashed the entire server.
With so many projects (400 total) launching on the Solana blockchain, we also saw SOL pools go live. The staking mechanism is attracting more and more people to join the ecosystem and explore different decentralized applications. Adding on to the good news, we saw Sam Bankman-Fried (SBF), the CEO of FTX, announce they are integrating Solana into their upcoming creator-centric NFT marketplace.
With bullish evidence piling up, the market reacted in an explosive fashion, to say the least. Some of the experts in the top payment networks like Greg Waisman, predict SOL can potentially reach $500 by the end of the year. On the other hand, Wall Street investors are warning clients about the risks of overvaluation in the altcoin space. They refer to the recent rally to be a reflection of retail interest rather than a reflection of structural changes in the ecosystem.
So what is the ceiling for SOL in the short-term?
The next price movement is likely going to be a pullback. We can expect a lot of traders and holders to take a good percentage of profit, at least the initial capital. If we revisit the daily charts, we can see $183 is the key resistance level. There will be a tug of war between these levels, so it is better to monitor which side we close.
If Solana manages to close above the key resistance level, it opens up floodgates and can expect to see the price go parabolic. We can again see a quick run-up in price to anywhere between 250-300 dollars area. You know what this means, right? It will flip Cardano’s market cap, assuming ADA does not make any big moves ahead of the launch of its smart contracts.
Born and brought up in India, Karthikeya Gutta is a crypto journalist and freelance contributor for ItsBlockchain. He covers various aspects of the industry with in-depth analysis and research. His passion towards blockchain and crypto ecosystem is mainly because he believes it can really change the world and help millions of people.
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