As a seasoned crypto investor with years of experience navigating the volatile waters of the digital asset market, I find myself intrigued by the recent surge in Solana’s SOL token. Having witnessed the meteoric rise and fall of numerous altcoins, I remain cautiously optimistic about SOL’s potential to breach the $260 mark again.
Solana’s native token, SOL, has risen approximately 13% from its recent low of $203.30 on December 10th, regaining the $230 level. This latest market movement suggests potential for further growth, as supported by both derivatives and on-chain indicators. The question now among investors is whether this correction has ended, and what factors might propel the price to reach $260 and potentially even higher.
In the year 2024, SOL was among a small group of coins that hit a record high, peaking at $264.50 on November 22nd. Regrettably, this surge in value didn’t last, as SOL struggled relative to the overall altcoin market which saw a 18% increase since November 22nd, while SOL experienced a decrease of 12%.
A portion of SOL’s current growth can be linked to Solana’s SPL tokens, including memecoins. Lately, this particular market segment has faced a notable slump in trading activity and price. In the last week alone, Dogwifhat (WIF) dipped by 8%, BONK (BONK) dropped by 9%, and Jupiter (JUP) suffered a 12% decrease. Similarly, projects like POPCAT (POPCAT) and Wormhole (W) plummeted by a steep 11% within the same timeframe.
Of greater worry is the 63% decrease in transaction volumes on the Solana network over the week ending December 9, which has sparked questions about the longevity of its recent price surge. It’s worth mentioning that this trend wasn’t isolated to Solana; Ethereum, BNB Smart Chain, and Avalanche also experienced comparable drops in transaction volumes.
MEV Strategy ‘sandwiching’ linked to SOL’s underperformance
Despite the specific causes of SOL’s underperformance compared to the wider altcoin market being uncertain at this time, certain traders like WazzCrypto posit that Maximal Extractable Value (MEV) might be the major contributor to the recent decline.
According to a post by WazzCrypto on X platform, the primary method for deriving value on Solana is through a technique known as ‘sandwiching.’ This is an approach used for Maximal Extractable Value (MEV), where traders position orders before and after a specific transaction to profit from price variations caused by that transaction. The discussion in the thread focuses on an example where a single address allegedly accounted for half of the trading volume of the MOTHER token, while most other traders suffered losses during similar token launches.
On December 9, the cryptocurrency market crash seemed to work in favor of SOL, as it managed to clear out excessive borrowing within the system. The open interest for SOL futures decreased by approximately 12%, now standing at about 22.8 million SOL. For the first time in over a month, the cost associated with bullish leverage for SOL dropped below 1%.
Initially reaching 6% monthly growth on December 5 (indicating excessive optimism), the funding rate subsequently dropped dramatically on December 9, coinciding with the compulsory selling off of overleveraged long positions. Notably, the market situation seems more stable now, especially given that the total Solana futures open interest has increased to a substantial $5.2 billion.
The confidence of investors in SOL received another positive push due to Bitwise, a crypto ETF provider, setting a target price of $750. They based this prediction on increasing institutional investments, a more favorable regulatory landscape, and the emergence of substantial projects within the network. These factors could potentially strengthen SOL’s influence in the memecoin market.
Moreover, it’s looking more likely that an Exchange Traded Fund (ETF) based on Solana could soon be approved in the U.S., given recent developments such as Gary Gensler’s resignation as Chair of the Securities and Exchange Commission (SEC). This optimism among SOL investors is further fueled by a positive forecast for early 2025, along with robust derivatives markets.
This post serves as a source of basic knowledge and isn’t meant to function as either legal guidance or financial advice. Any perspectives, beliefs, or opinions shared within this article are solely those of the author and may not align with or accurately represent the views and standpoints of CryptoMoon.
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2024-12-11 23:15