Solana’s growth has been more than organic, but here’s a word of caution

The third quarter of the yr was each thrilling and nerve-wracking for many within the crypto-community. And, whereas each Bitcoin and Ethereum noticed optimistic quarters, the massive winners have been truly newer protocols. Actually, a major surge in sensible contract platforms outpacing the bigger market was noticeable with the rise of initiatives equivalent to Solana, Avalanche, and Terra. All the aforementioned gained by at the least 300% on the charts. 

Though the Ethereum community had a burst of recent consumer adoption, largely because of the fast rise of NFTs, it additionally suffered from document excessive transaction charges all year long. This, together with a complete of $1.96 billion in charges in Q3 alone.

This benefited aggressive sensible contract platforms and so-called ‘Ethereum-killers’ like Solana and Avalanche as customers looked for low-fee options to Ethereum. 

Notably, SOL’s value surged by near $200 in early September as ETH’s imply transaction payment topped $55. 

Source: Coin Metrics

With SOL’s value and ETH’s imply transaction payment seeing coinciding tops, speculations of SOL’s rally being pushed by Ethereum have been in place. So, was this all there was to SOL’s progress? 

Extra natural than it appears

The August-September rally was known as “Solana Summer time” by many out there as the value of the alt hit $200 per token. This, from a modest $2 firstly of the yr.  Nonetheless, quickly after, the asset noticed appreciable consolidation following its ATH of $215 as pessimism took over. This solely fueled speculations of SOL’s rally being precipitated by ETH. 

Solana’s rally, nonetheless, was way more natural than it appeared. Notably, Solana’s DeFi initiatives crossed over $3 billion in September this yr. The sheer rise within the variety of initiatives for SOL proved that it’s able to giving robust competitors to ETH and different ETH-killers.

Solana additionally used the explosion of NFTs to drive its progress as an interoperable blockchain platform. Actually, NFTs on SOL hit a $1 billion market cap on 2 October. 

Moreover, whereas SOL’s spot market noticed low commerce volumes and cheaper price anticipation, the Futures market introduced a brighter outlook. The Open Curiosity for the altcoin noticed an uptick during the last couple of days, one indicating an increase within the variety of excellent contracts held by market contributors.

The identical additionally underlined the truth that new capital has been flowing into the coin’s markets. 

SOL Open Curiosity | Source: Coinalyze

Getting dangerous, however hanging in there 

Solana’s market has been somewhat unresponsive of late, however over the next timeframe, the altcoin clung on to the upper $164 resistance. Additional, optimistic information like Ubeswap asserting a collaboration with Allbridge to convey each Solana’s native asset ‘SOL’ and Saber’s governance token ‘SBR’ to Celo gave the alt the required social pump. Regardless of the contained costs. 

Nonetheless, at press time, SOL’s Sharpe ratio had entered the adverse territory, reaching July ranges whereas volatility additionally noticed a dip. The autumn within the alt’s Sharpe ratio appeared indicative of the truth that SOL’s efficiency had gotten riskier when in comparison with a “risk-free” asset over a window of time.

Though a value pump may reverse this harm on the time of writing, it appears unlikely that SOL would have a sustained rally within the close to future. 

However, Solana’s progress has been too massive to disregard. What’s extra, the seventh-ranked crypto has held its rank on the charts, regardless of its consolidating costs. Whereas day by day and weekly positive factors of “simply” 2.89% and 10.10%, respectively, it may make a stronger comeback when altcoins actually rally.