Solana’s native token SOL (SOL) started the day with a 5.3% gain in trading just over $167. The move comes alongside Bitcoin (BTC)’s rise to $70,550 on election day in the U.S., putting SOL closer to $200 as the desired target for many traders.
Current on-chain data and derivatives market indicators suggest that SOL’s rally may continue in the short term.
Solana continues to lead in decentralized exchange (DEX) trading volume, a clear indicator of user activity and trading fees that are critical to driving sustainable growth and encouraging adoption of additional projects and traders.
7-day trading volume market share of decentralized exchanges. Source: DefiLlama
Recent data shows Solana’s clear lead over the Ethereum network. In particular, none of Ethereum’s layer 2 solutions could compete with Solana’s $11.86 billion in weekly DEX activity. This highlights that low fees alone are not enough to overcome Solana’s competitive advantage.
Solana’s activity is notable considering its relatively small TVL.
As reported by DefiLlama, in terms of fees, Solana has raised $20.5 million over the past seven days, significantly narrowing the gap with Ethereum, which raised $22.6 million. This proximity is noteworthy considering that Ethereum has $47.5 billion in network deposits. That’s almost eight times more than Solana’s $6 billion.
Ethereum TVL, ETH vs. Solana TVL, SOL. Source: DefiLlama
Deposits on the Ethereum network have grown by a small 4% over the past three months, reaching 19.8 million ETH on November 5. Meanwhile, Solana’s TVL increased 38%, reaching a total of 38.1 million SOL. This difference can be partially attributed to the much more consolidated liquid staking sector on Ethereum, with Solana benefiting from Jito, Marinade, and Sanctum.
SOL holders enjoy a 6.5% return on primary staking, which leads to 66.9% of the circulating supply participating in the network validation process. In comparison, the staking ratio for Ethereum is 28.6% and 22.4% for the BNB chain, providing a much larger supply of liquidity that can be sold immediately on these networks.
Additionally, StakeRewards data shows that the SOL equivalent inflation rate decreased to 5.4% from 5.7% three months ago. In practical terms, this change will result in higher net returns for those participating in the Solana network validation process, addressing previous criticisms of SOL’s inflation rate.
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Demand for SOL futures is balanced between bulls and bears.
Solana’s on-chain metrics are strong, especially when compared to the Ethereum and BNB chains, but this does not necessarily equate to bullish market sentiment. Analysis of the SOL perpetual futures market is important to gauge trader positioning. Exciting periods usually lead to positive funding ratios, indicating that long positions (buyers) are paying for leverage.
SOL perpetual futures 8-hour funding rate. Source: Coinglass
Even though the price of SOL fell to $155 on November 4, the funding rate remained positive, albeit slightly. This data suggests that traders are at least neutral, if not a bit bullish, and provides room for the leveraged buying activity that is key to the continued push toward $200.
However, it would not be careless to overlook the impact of the results of the US presidential election and Federal Reserve Chairman Jerome Powell’s comments following the interest rate decision on November 7.
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.