Introduction
Alright, folks, let's cut to the chase. You've seen it, I've seen it - $SOL’s price just rocketed from a depressing $8. That's not just a small bump; it's a full-blown revival. But why? What's the real deal behind Solana's sudden comeback?
Remember the golden days of the last crypto bull run, Solana wasn’t just another player; it was a crypto superstar. People were betting big on $SOL, saying it might even knock out Ethereum in a few years. Then came the crash. The whole market went belly-up, and Solana, unfortunately, took a brutal hit with it. But the real knockout blow? The FTX’s collapse. With $SOL being one of Sam Bankman-Fried's favored projects, his downfall shattered trust in the token, sending the price down to $8.
The impact of FTX's collapse on Solana was more than just a market reaction; it was a chain reaction that hit at the core of Solana's ecosystem. FTX had its fingers in many Solana projects, just like Serum Exchange. When FTX crumbled, these projects took a hit, leaving assets like Sollet BTC unbacked and their value in freefall. What’s more, FTX's fire sale of 250,000 $SOL added fuel to the fire, causing further instability to the token. This series of events wasn’t just a financial blow; it was a crisis of confidence in Solana, leading to a sharp decline in both its value and its reputation.
People started losing faith in Solana, and it wasn’t just individual investors. Two of the biggest NFT projects on the blockchain, y00ts, and deGods, decided to leave Solana. The creators behind these projects were looking to expand and felt that they had better chances on Ethereum and Polygon. This move was a sign. If top projects don't see a future on Solana, that says much about the platform. The effect was immediate and noticeable. Solana's TVL in its ecosystem took a nosedive, falling by 97.88% from a peak of $10.17 billion to just $215 million. It wasn't just the TVL; active addresses and trading volumes hit rock bottom, too.
But why, after such a drastic downfall, is $SOL now being a top gainer tick on Binance? What changed in the ecosystem of Solana? Was it the increase in blockchain activity, the inflow of investments into Solana’s native projects, or the recent technological upgrades that refreshed Solana's appeal? Or is there more to the story, perhaps factors not immediately apparent? These are the questions we'll be going through.
I won't discuss Solana's technology or its team as a typical project research piece might. Instead, my focus will be on analyzing Solana's statistics, offering personal judgments and theories, and sharing predictions about Solana as a Layer 1 and as an investment choice.
Statistics Talk
Circulating Supply
In terms of circulating supply, we see a huge difference compared to 2021. Put simply, there are nearly twice as many $SOL tokens in circulation now as there were at its all-time high. Today's $100 price per $SOL isn't the $100 of two years ago - it's equivalent to $166 in terms of market cap. This means that a 60% pump from $100 will bring $SOL’s valuation to an ATH.
To go deeper into its emission, all the initial allocations for the founding team, grants, and seed rounds are now fully in circulation. What we need to watch is the 'Inflation' allocation in Solana's supply. It's a significant amount that gets distributed to those who stake their $SOL, with the inflation rate set to decrease to a minimum of 1.5%, but sitting at 5% currently. With this kind of automatic token emission, $SOL's supply is endless, which is something we should consider.
Price/TVL
Breaking down the chart from DefiLlama, we see two lines: one for $SOL's price, which is heading up, and another for the Total Value Locked (TVL) in Solana's ecosystem, which isn't keeping pace. The small increase in TVL we notice isn't a sign of growth; it’s likely just reflecting the higher price of $SOL tokens. The fact that $SOL's current circulating supply is nearly doubled that of 2 years ago is also neglected. This mismatch suggests that $SOL’s price bump isn't because its ecosystem is flourishing with new projects and users. Instead, the price seems to be moving on its own, while the ecosystem is merely treading water, not making any real progress.
Price/Stablecoins
Taking a closer look at the "Price/Stablecoins" chart, we can see even clearer evidence of what's going on. There's only a small change in the amount of stablecoins within the Solana ecosystem. This is key because stablecoin inflow is a solid indicator of a blockchain's health and growth. If new money isn't coming in, especially in the form of stablecoins, that's often a red flag. It suggests that despite Solana's price increase, there's little corresponding rise in new, stable investments anchoring into the system. Stablecoins represent confidence and utility, and if they're not growing on Solana, it's a sign that Layer 1's ecosystem isn't really expanding.
Solana validators
When we examine the delegation pattern among Solana’s validators, a distinct trend comes into view. There is a notable large delegation, likely from the major player Alameda, followed by a number of smaller delegations. This pattern of a dominant player accompanied by numerous smaller stakeholders points to a concentration of influence within the network. This is worth discussing because it shows Solana is potentially controlled by a small number of entities.
Digging into the numbers a bit more deeply, it’s clear that there's a significant concentration of delegated SOL tokens among the validators on the Solana network. A script run to analyze the exact figures shows that out of 1997 validators, 1818 have received delegations from both the Solana Foundation and Alameda Research. Collectively, these entities have delegated a hefty sum of 106 million SOL, with the Foundation contributing about 73 million and Alameda about 33 million.
Moreover, Solana's focus on growing big and fast has its downsides. The network's got a lot of nodes, mainly because of cash incentives from a couple of big names. They're even covering double the server costs for node operators. This growth push might show some worry about keeping things going in the long run.
My Take
Conspiracy
Solana might not be your typical blockchain coin that's all about solving technical problems. It looks more like a VC's dream - a way for VCs to cash in on retail investors. Take this for instance: Sam Bankman-Fried got into $SOL when it was just twenty cents a pop. He and his market-making crew hyped it up, pushing this little-known coin to become one of the top Layer 1 blockchains, boasting a $78 billion market cap during the bull run. And it's not just the price pump; most of Solana's validators are tied up with him and the Solana Foundation. This suggests that as $SOL keeps getting minted, these entities will likely hold a huge amount of share. So what does this mean? Well, it makes $SOL pretty easy to manipulate, especially when the bulk of it is in the hands of a few.
Rewind to just a few months back, and Solana was in a rough spot. Projects built on its blockchain were jumping ship or going under, the TVL was scraping the bottom, and traders were opening short positions on $SOL, expecting it to fall even further. The FTX collapse had dragged Solana's name through the mud. In such a state, what could possibly turn the tide for Solana? Standard methods like marketing, hackathon, or even tech upgrades didn't seem to cut it. The one thing that could make a difference? The answer is: a significant price pump to recapture interest and investment in $SOL.
The critical question then is, when would the ideal moment for such a price pump be? Waiting until after the Bitcoin halving wouldn't be wise, as by then, it's too late. The market's attention will have shifted to the shiny new projects packing superior technology and flush with investor cash, ready to take the stage. So, when? Yes, the right timing would be just before the halving event. That's when Bitcoin traditionally begins its ascent, lifting the market with it. This pre-halving phase is when a well-timed price pump could leverage the growing market sentiment, aligning Solana for a rebound just as the tide starts to rise.
Statistic-wise, the recent pump in Solana’s price is not due to any real growth in its network or adoption. It is that the Solana Foundation, possibly alongside its early backers or even Alameda, is arranging this revival. This manipulated pump has done wonders for Solana's standing, breathing new life into its image and reigniting investors' trust. Narratives have comeback about Solana's potential to outperform Ethereum, with projections and charts of $SOL at $300, soaring past its all-time high. This move has already redefined Solana's place in the crypto market.
What's my forecast for Solana? It's a tough call, but here's the likely scenario: Solana will probably maintain its spot on the crypto map through the next bull run. The price of $SOL might continue to surge, sometimes without apparent reason, drawing in retail investors who are hoping to catch the wave. As these prices climb, the moment will eventually come for venture capitalists and other significant stakeholders. That's when they'll likely make their move, cashing out for substantial gains. It's a cycle we've seen before, and Solana could well follow this script.
Solana’s Future
The financial strength of the Solana Foundation has definitely played a big role in the recent rise of the price of $SOL. There's a lot more going on here though, beyond just their financial health. Solana stands out as an innovative L1 blockchain, known for its really low gas fees, like less than a penny, and for handling a lot of transactions all at once. This is quite different from Ethereum's one-at-a-time approach. Basically, Solana can multitask really well, which makes it faster and more scalable compared to Ethereum.
Choosing Rust as Solana's programming language also seems like a smart move. Rust is perfect for blockchain-related stuff and a great option for future projects. Ethereum uses Solidity, which is easier to get into, but Rust, even with its complexity, is faster, more efficient, and safer.
Despite these excellent features, Solana's TVL hasn't seen much change. I think this is because there are so many new blockchains around now. Back in 2020, it was mostly Ethereum, BNB Chain, and Terra (which went straight to zero in 1 day). But now, in 2024, we've got newcomers like Arbitrum, Optimism, Polygon, Manta Network, Base, and a bunch of Layer-2 solutions. They've quickly become popular, pulling in developers and lots of investment from crypto enthusiasts because of their speedy, affordable transactions and the big shift of funds from Ethereum. Even Bitcoin, known for its high fees and older tech, is getting some new interest with its BRC-20 trend.
This means Solana really needs to step up its game to stay on top. But for Solana fans, there's some good news. The ecosystem is really active, especially with the price going up recently. The trading volume hit a record $2.5 billion USD. A big shoutout to Solana DeFi projects like Pyth Network and Jito for their huge airdrops which played a part in this.
And then there are projects like Jupiter, which I personally think is the best aggregator on Solana, doing great with exceptional revenues generated. It's funny to see Saros Finance (linked to Coin98), which raised a lot of money in 2021 and then went quiet, is now making a comeback. Though Saros is not a dedicated and well-developed project, its return is a good sign for Solana. It shows that more projects are likely to restart or kick off new initiatives.
To sum up, Solana still has a chance to be one of the top blockchains and holds a significant spot in my portfolio. The competition has gotten tougher, with lots of Layer-2s offering great transaction speeds and strong support. However, the future of Solana will heavily depend on its community, the innovations from its native projects, and the strategic decisions made by the Solana Foundation.
- Conclusion
As we wrap up this analysis into Solana, a few points stand out. First, Solana’s path in crypto is a case study of how market forces and influential entities can shape a coin’s fate. This isn’t a phenomenon unique to Solana; the crypto world is full of examples of tokens and coins manipulated by groups with significant financial power. These entities aim to capitalize on retail investors, who are drawn to the promise of Lambo and Dubai in this volatile market.
Moreover, the story of Solana emphasizes a broader theme: the power of narratives and market psychology. It’s not just about the underlying technology, or the fundamentals of a project. Often, what drives a coin’s value sky-high is a well-timed market move, a surge in investor sentiment, and of course, manipulated by those with deep pockets. Solana, with its dramatic price swings and the play of centralized entities, shows how certain cryptos, even at billions of market cap, can become tools for the rich to capture your lifetime savings.
Wrapping it up, Solana's story is still pretty exciting. It's got solid financial backing and some cool tech, like super low gas fees and the ability to handle a bunch of transactions at once. But it's not all smooth sailing; the competition is heating up with lots of new blockchains and Layer-2s stepping up their game. Despite these challenges, in recent weeks, the community has been hyped, trading is hitting new highs, and even projects that had gone quiet, like Saros Finance, are making a comeback. This shows that there's still a lot of interest and faith in what Solana can do. In the end, Solana has got a fighting chance to stay at the top. It's not going to be easy with all the competition out there, but its success will depend on how well the community, the projects on its platform, and the Solana Foundation work together.
In the world of finance, especially with crypto, it’s all about knowing the game. People who jump in without proper knowledge can easily end up losing their 9-5 job hard-earned salaries. But the flip side is, that the bigger the risks can lead to bigger rewards. Even with all the manipulation in crypto, like what we’ve seen with Solana, a lot of people, coming from empty hands, have made serious money, each in their own way. They know what’s going on behind the scenes and make smart moves. If you’re keen on sticking around with Web3, blockchain, and crypto, the best move is to inform yourself how it all works.
Know the game, then play it smart.
