Solana’s native token, SOL (SOL), was last trading above $190 on July 29, despite an impressive 33.5% gain since retesting the $110 level on August 5. However, the bullish momentum has hit a strong resistance at $150. Some analysts say that SOL’s price is following the movement of Ether (ETH) in 2020, which led to an all-time high. However, regardless of what the charts indicate, it is important to evaluate the current demand for SOL tokens before making any bold predictions.
2020 ETH Fractal Says SOL Could Reach $1,000
Kaleo, a crypto trader and technical analyst, believes that SOL’s current fractal mirrors Ether’s momentum prior to its 245% rally from its previous high in 2021, suggesting that SOL could potentially reach $1,000 by 2025. While there is no problem setting bullish targets, the Solana network’s short-term on-chain metrics indicate a decline in activity, which is not usually a signal that precedes a bull market.
Moreover, if SOL were to trade at $1,000, it would mean a market cap of over $500 billion, a level that Ether held for less than 40 days at the peak of its late-2021 cycle. For reference, there are currently only 18 global companies with a market cap of over $500 billion, making this scenario unlikely even for highly profitable brands like Costco, Procter & Gamble, and Bank of America.
From a fundamental analysis perspective, it seems highly unlikely that SOL will trade at $1,000. Nevertheless, this does not rule out the possibility that SOL could reach $300, which would represent a 104% increase from its current $147 level. First, several Solana spot exchange-traded fund (ETF) applications are pending regulatory approval in the United States. While unlikely, these efforts differentiate Solana from its competitors.
More importantly, in 2024, Solana will surpass BNB Chain (BNB) to become the second largest blockchain by total locked value (TVL), with $4.8 billion in deposits. While this figure may seem small compared to Ethereum’s $48.8 billion TVL, it is significant enough to drive competition in decentralized exchange (DEX) volume. For example, in the past seven days, Solana’s total DEX volume was $9.4 billion, compared to Ethereum’s $10.8 billion.
SOL appears to be overvalued compared to Ethereum layer 2 tokens.
The downside is that while Solana’s fees are significantly lower than Ethereum’s average $1.80 transaction fee, users often end up paying a similar amount due to the high percentage of failed transactions and the maximum extractable value (MEV). MEV occurs when validators reorder transactions waiting to be included in the next block in their favor. According to DefiLlama, over the past seven days, Ethereum’s network fees totaled $13.7 million, while Solana’s total was $8.4 million.
However, given the differences in centralization and fee structures, it may not be entirely fair to compare Solana to Ethereum’s base layer. A more appropriate comparison would be Ethereum’s layer 2 ecosystem. A recent thread on the X social network by Blockspace analytics firm growthepie.xyz provides some interesting insights into this. For example, Ethereum’s layer 2 ecosystem holds $9.7 billion in stablecoin deposits. That’s more than Solana and BNB Chain combined.
Additionally, the number of active addresses in Ethereum’s Layer 2 ecosystem over a 7-day period is almost identical to Solana’s 1.6 million. Meanwhile, the fully diluted value of Ethereum’s Layer 2 tokens, including Optimism (OP), Arbitrum (ARB), Polygon (MATIC), Mantle (MNT), Starknet (STRK), ZKsync (ZK), and Immutable X (IMX), is $31 billion, more than 60% lower than Solana’s total value of $85 billion.
Ultimately, one could argue that Solana’s reliance on airdrops and mimecoin launches, while potentially creating demand for SOL during a retail-led rally, is unlikely to be sustainable in the long term. However, the robust growth of projects like Helium, Jupiter, and even Solana’s PayPal USD stablecoin suggests that there is still a way for SOL to reach $190, but it is unlikely in the short term given the fierce competition from Ethereum Layer 2 solutions.
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.