Solana’s native token, SOL (SOL), has surged 8% since falling to $222 on November 26. Despite this recovery, some investors remain skeptical, citing a sharp correction from the Nov. 23 all-time high of $263.80 as a possibility. A sign of a shaky uptrend. However, on-chain and derivatives data shows that SOL still possesses significant upside potential.
SOL/USD (blue) vs. altcoin market cap (purple). Source: TradingView / Cointelegraph
Investor frustration is partly due to a slight 1% rise in SOL between November 20 and November 27, during which time the broader altcoin market cap increased by 12%. Several tokens outperformed significantly, with Stellar (XLM), Celestia (TIA), Fantom (FTM), Uniswap (UNI), and Polkadot (DOT) posting gains of over 40% over the same period.
While it is difficult to pinpoint the exact cause of the change in investor sentiment, SOL holders should focus on Solana’s strengthening fundamentals. The network has solidified its position as the second largest programmable blockchain through developer activity and user engagement. Supporting this growth, Solana’s total value locked (TVL) increased 48% in the 30 days ending November 27.
Solana Network Total Locked Value (TVL), USD. Source: DefiLlama
To provide context, deposits on the BNB chain increased by 14% over the same 30-day period, while total value locked (TVL) on the Tron network increased by 13%. Solana’s standout metrics include Jito liquid staking solution at $3.4 billion (+44%), Jupiter decentralized exchange at $2.4 billion (+50%), and Raydium at $2.2 billion (+58%). This surge in deposits reflects the growing demand for SOL due to the expanding decentralized application (DApp) ecosystem.
Solana and Ethereum are thriving in separate niches.
Although some analysts suggest that SOL competes with Ether (ETH), data shows that both networks can grow independently. According to DappRadar, Ethereum’s on-chain activity has increased 47% over the past 30 days. During that period, Uniswap trading volume on Ethereum surged 62%, while CoW Swap recorded a 71% increase.
While Solana dominates memecoin launches and trading, Ethereum continues to be the network of choice for decentralized finance (DeFi) opportunities. In particular, three of the top five highest-grossing DApps (Raydium, Jito, and Pump.fun) belong to Solana, surpassing Ethereum’s leaders Lido, Uniswap, and Aave in this metric.
Solana and Ethereum can grow independently without competing directly for the same user base. However, Solana’s reliance on memecoins poses greater risks. This is because the speculative frenzy surrounding tokens like BONK, POPCAT, MEW, and SPX6900, some of which have surged more than 100% in three months, may be unsustainable in the long term.
relevant: Stablecoin trading volume surges to $1.8 trillion in November
Futures premiums provide valuable insight to assess whether traders have changed their sentiment on SOL following the 10% decline between November 23 and November 27. In stable markets, monthly futures typically trade 5-10% above spot prices to account for settlement delays.
SOL Annual premium for 2-month futures. Source: laevitas.ch
Currently, SOL futures indicate that traders are paying a 23% annual premium to hold long positions. This is the highest level in seven months. While this suggests optimism, excessive strength could push this indicator above 40% and increase the risk of cascading liquidations during an unexpected price correction.
Based on Solana’s on-chain activity and derivatives market data, there appears to be potential for further price increases. At a current market cap of $113.7 billion, SOL trades at a 73% discount to Ethereum’s $429.4 billion, leaving significant room for growth.
This article is written for general information purposes and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.