When the price curve of Solana (SOL) fell below the critical $10 mark at the turn of the year, there were quite a few who wanted to classify the project as a failure. However, the cryptocurrency initially managed to stabilize in 2023 – and now SOL has staged a rally that makes the majority of other altcoins look really old.
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Solana is up 20 percent over the past seven days and an impressive 70 percent for the month
At around $40, SOL is currently at a high for the year. Reason enough to take a closer look at the development.
The cryptocurrency crashed around a year ago when the crypto exchange FTX and Sam Bankman-Fried’s associated group of companies had to declare bankruptcy. Bankman-Fried, who is currently on trial in New York, was an avowed fan of Solana and had hoarded billions worth of SOL in his empire.
The sympathies were mutual: the Solana Foundation had also invested millions in FTX and the crypto exchange’s FTT token. The FTX bankruptcy hit SOL harder than other cryptocurrencies, with investors fearing financial problems for the Solana Foundation and increased price pressure on SOL due to sales from the insolvency estate.
However, SOL is currently experiencing a comeback despite all these assessments. Analysts said one of the main reasons for the cryptocurrency’s price explosion is that many investors had shorted SOL, i.e. were betting on falling prices. However, they had underestimated the Solana community, which was in no way prepared to sell its SOL, according to the theory. Now those who were short Solana find themselves in a classic “squeeze” situation, which is fueling the dynamics of the price curve.
Solana ecosystem proves resilient
However, there are also hard facts that underline that Solana is in a better position than often assumed. For example, developers have remained loyal to SOl, with around 1,000 specialists currently working full-time on the further development of the ecosystem, according to figures from “Developer Report.” Crypto legend Vitalik Buterin, founder of Ethereum (ETH), has publicly encouraged Solana developers on several occasions, particularly at New Year. With massive manpower behind it, the Solana ecosystem appears to be on a solid footing.
This was also demonstrated at the annual Solana conference “Breakpoint”, which this week featured highlights such as the SOL integration with Google BigQuery. In addition, reassuring news came from the FTX insolvency administrators in September: they will indeed cash in Solana to the value of more than 1 billion US dollars in order to be able to pay out creditors. However, these SOL sales will be staggered to avoid any major impact on the Solana price curve.
Will SOL become the “Ethereum killer” again?
In view of the recent SOL rally, voices are once again being raised calling for SOL to become the “Ethereum killer.” Solana was already given this nickname in 2021 when SOL galloped into the top ten most important cryptocurrencies at record speed. The comparison with Ethereum stems from the fact that Solana is comparably multi-functional in promising sectors such as decentralized finance (DeFi), NFTs, and blockchain gaming. However, Solana, born late for a cryptocurrency in 2020, had already found technological solutions to the well-known Ethereum problems of network capacity and transaction fees at launch.
However, this reputation was tarnished by repeated network outages at Solana and, not least, concerns about the future-proof financing of the foundation. Recently, however, Solana’s cooperation with credit card giant Visa and Shopify demonstrated that large companies firmly believe in the future of Solana. Can Ethereum be attacked again from here?
Ethereum is backed by 5,800 full-time developers, point for ETH. In the important DeFi sector, Ethereum is the measure of all things with almost $23 billion TVL, as the data from DeFiLlama shows. At Solana, the DeFi sector is slowly on the rise again and has been reaching one annual high after another for weeks. But with a good 400 million TVL currently, the gap between Solana and Ethereum is huge, period for ETH. Ethereum is resolutely tackling its scalability and fee problems; the Dencun upgrade expected for early 2024 should deliver noticeable improvements here.
Conclusion: Solana is encouraging – Ethereum out of reach
For the foreseeable future, the idea of Solana as the “Ethereum killer” is likely to remain wishful thinking. But if SOL continues to manage to shed the legacy of the FTX bankruptcy relatively quietly, the prospects for SOL seem positive.
That is because the large SOL community with its many developers is generating use cases and collaborations that competitors such as Cardano (ADA) are noticeably lacking. SOL’s current upswing could prove to be more sustainable than those who bet against Solana and wanted to issue a death certificate thought.
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First published in BLOCK-BUILDERS.DE. A third-party contributor translated and adapted the articles from the originals. In case of discrepancy, the originals will prevail.
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