The cryptocurrency market is filled with excitement as Solana (SOL) surges 8% following a broader market recovery. Investors are eagerly watching to see if this upward trend will continue or not. But what’s driving this rally, and how far can Solana go? Let’s dive into the details.
What’s Fuelling Solana’s Rally?
Solana’s native token, SOL, jumped 8% on March 19 as investments came back towards riskier assets. This move came before the expected U.S. FOMC meeting by US Federal Reserve Chair Jerome Powell. Interest rates were expected to remain steady and analysts predicted a softer inflation outlook for 2025. This optimism has spilled over into the crypto market, which boosted cryptocurrency like Solana.
SOL’s gains were similar to the US stock market. Which is more evident, in the Russell 2000 index. This suggests that SOL’s rise wasn’t driven by crypto any specific news but rather by the broader market. Even still, the crypto world did receive reports that the SEC might drop its long-standing lawsuit against Ripple.
Solana’s TVL Hits New Highs
A major driver behind Solana’s rally is the rising Total Value Locked (TVL), which follows deposits on the network. Despite a 47% drop in onchain activity over two weeks, Solana’s TVL has touched a July 2022 high of 53.2 million SOL in March 17. This growth highlights resilience, as users continue staking assets even during short-term volatility, signalling confidence in the platform’s long-term value.
In comparison, BNB Chain’s TVL went up just 6%, while Tron’s deposits fell 8%. Solana’s ability to attract steady deposits, even during a market slowdown, shows how resilient the community is doing. Platforms like Bybit Staking and Drift have seen significant growth, with deposits surging 51% and 36%. Additionally, restaking app Fragmentic recorded a 65% rise in SOL deposits over the last 30 days.
Solana Outshines Competitors
Despite a broader decline in decentralised application (DApp) activity, Solana continues to stand out. Several Solana-based DApps, including Pump.fun, Jupiter, Meteora, and Jito, rank among the top 10 in fees. These platforms are outperforming giants like Uniswap and Ethereum’s leading staking solutions.
More impressively, Solana’s weekly base layer fees have surpassed Ethereum’s, even though Ethereum still holds the top spot with $53.3 billion in TVL. This achievement shows Solana’s growing influence in the crypto space.
SOL Derivatives Show Balanced Demand
While SOL’s price dropped 27% over the past 30 days, demand for leveraged positions remains balanced. The futures funding rate, which is measured as the balance between long and short positions, has stayed neutral. This indicates that neither bulls nor bears are dominating the market.
Typically, periods of high bearish demand push the funding rate to -0.02%, meaning shorts pay to maintain their positions. Similarly, bullish sentiment drives the rate above 0.02%. The current stability suggests that traders are cautiously optimistic about SOL’s future.
Reduced Token Unlocks Ease Supply Pressure
Another factor supporting Solana’s rally is the reduced growth in SOL supply. In April, 2.72 million SOL tokens will be unlocked, but this number drops to 0.79 million in May and June. This slowdown in supply growth, akin to reduced inflation, alleviates selling pressure and supports price stability.
With fewer tokens entering the market, SOL is well-positioned to reclaim the $170 level it last touched on March 3. The combination of rising TVL, balanced derivatives demand, and controlled supply growth paints a bullish picture for Solana.
First-Ever Solana ETF
Adding to the excitement, the first-ever Solana Futures ETF is set to launch in the U.S. tomorrow. Offered by VolShares, this ETF opens the door for institutional investors to gain exposure to Solana. Traders are clearly optimistic, which can be seen by SOL’s 8% price surge ahead of the ETF launch.
The ETF news comes with the SEC’s decision to drop its lawsuit against Ripple. This has sent XRP soaring 15%. Bitcoin and Ethereum have also seen gains of 4% and 9%, respectively, contributing to the overall market bullish movement.
What’s Next for Solana?
Solana’s market capitalisation has climbed to $68 billion and its 24-hour trading volume has reached $2.73 billion. How far can SOL go? The answer depends on a few factors, like investor sentiment, broader market trends, and the success of any new developments like the Solana ETF.
For now, Solana’s strong fundamentals, rising TVL, and balanced derivatives market suggest that this rally could continue for some time. If the market retains its current momentum, we could witness SOL reclaiming the $170 mark.
In conclusion, Solana’s recent surge is more than just a short-term trend. It’s a testament to the network’s resilience and growing adoption. As the crypto market continues to recover, all eyes will be on Solana to see how far it can go.
