Solana’s native token SOL (SOL) rose 13% between July 14 and July 16, breaking the $160 resistance level for the first time in five weeks. However, there is little to celebrate for bulls, as SOL is down 24% from its March high of $209. Traders are now questioning the sustainability of the uptrend and the possibility of a retest of the $180 level in the short term.
Solana Mimecoin Fever and Ether ETF Momentum
The recent excitement over SOL can be partly attributed to the final stages of approval for an Ether exchange-traded fund (ETF). According to Bloomberg analyst Eric Balchunas, the U.S. Securities and Exchange Commission (SEC) issued final guidance to asset managers on July 23, preparing for a launch. VanEck and 21Shares filed similar Solana ETF applications on July 8, but a final SEC decision is not expected until March 2025.
A significant portion of the Solana ecosystem is comprised of Mimecoins, thanks to the network’s low issuance and transaction fees. This has led to the success of Mimecoins like BONK and DogwifHat (WIF), which have reached market caps of $2.8 billion and $4.8 billion, respectively. More importantly, Solana has been able to build an active and engaged community that is difficult to replicate.
Over the past 7 days, several Solana SPL tokens have shown impressive returns, including MICHI (up 71%), POPCAT (up 70%), MYRO (up 36%), and TRUMP (up 30%). This movement is driving demand for SOL tokens by attracting new investors, increasing decentralized application (DApp) activity, and improving liquidity in the Solana ecosystem. This includes the total value locked (TVL).
Solana is currently the second-largest blockchain by decentralized exchange (DEX) trading volume, closing the gap with market leader Ethereum (ETH).
While Ethereum’s average transaction fee of $2.3 is an unfair competition, Solana DEX activity stands out even when compared to Arbitrum and BNB Chain, which share the advantage of very low fees. Also notable is the decline in trading volumes on Base, Ethereum’s second layer, which became famous for Memecoin and token launches. According to DefiLlama data, Base peaked on June 8 with a weekly market share of 10.8%, before falling to 3.6%.
Solana TVL Growth and SOL Futures Market Premium
The increased activity on Solana is also reflected in its Total Value Locked (TVL), which is now surpassing the BNB chain. A higher deposit base is generally considered bullish, increasing network security and contributing to a positive feedback loop that attracts more users and developers, increasing token value and growth potential.
Highlights from the Solana network include Jito, a liquid staking solution that saw a 14% increase in TVL over 30 days, and Kamino, a lending and leverage solution that saw a 12% increase in deposits over the same period. Finally, Jupiter Perpetual, a DEX aggregator, saw a 28% increase in TVL over the last 30 days. For comparison, leading BNB chain DApps PancakeSwap and Venus faced a 7% and 5% decrease in TVL, respectively, over the same period.
Related: Ahead of the launch of the ETH ETF, institutions are more bullish on Ether than retail.
Finally, we need to analyze the SOL futures market. The SOL futures premium reflects the difference between the derivatives price of the monthly contract and the spot price on the regular exchange. Typically, an annual premium of 5% to 10% (base) is incurred to compensate for the extended settlement. In essence, a higher premium indicates that traders are willing to pay more for the futures contract, which indicates bullish sentiment.
The SOL futures premium is currently at 12%, which has been the norm for the past few days. This indicates cautiously optimistic sentiment among traders, which is especially relevant since SOL has gained 25.7% in the past 11 days. Considering the active Solana network activity and derivatives indicators, SOL has the potential to continue its rally to $180.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.