Solana (SOL) prices rose 20% between September 28 and October 6, but it remains to be seen whether this rally was in sync with Bitcoin (BTC) prices or driven by other factors. Prior to the price breakout, or perhaps the recovery, SOL faced turbulent times after a U.S. court approved the sale of $1.3 billion of SOL from bankrupt exchange FTX.

The bankruptcy court has taken steps to ensure that the liquidation of FTX’s assets does not become a burden on crypto markets, requiring that sales be conducted through investment advisors on a weekly basis according to pre-established rules.

After the initial shock, Solana’s price dropped to a 2-month low of $17.34 on September 11, with a degree of confidence emerging from bulls as support at $20 was reestablished on September 29. This movement coincided with a successful upgrade to version 1.16, which boosted the SOL token by 16% over the next seven days.

Solana’s rally is also supported by the growth in the usage of decentralized applications (Dapps) and the increase in the trading volume of non-fungible tokens (NFTs). Solana’s price is now trying to establish support at $23 and consolidate its position as the fifth-largest cryptocurrency by market capitalization (excluding stablecoins), surpassing Cardano’s $9.22 billion.

Solana’s DApp and NFT Market Activity Surges

When analyzing a network focused on Dapp execution, the number of active users should be the top priority. Therefore, the addresses involved in smart contracts should be quantified first, which serve as a proxy for the number of users.

Note that the growth in activity was consistent across all sectors, including NFT marketplaces, decentralized finance (DeFi), collectibles, social, and gaming. Additionally, Solana’s active addresses interacting with Dapps surpassed Ethereum’s active addresses during the same period, capped at 55,230.

Solana has gained traction in the NFT market due to its cost-effective and scalable solution, as data is compressed and stored off-chain. This allows for more feasible large-scale production as they require lower minting fees, enabling creators to reach a wider audience.

Over the past seven days, the Solana network has surpassed Polygon in NFT sales, accumulating $6.8 million worth of NFTs according to Cryptoslam. In September, the situation reversed, with Solana totaling $23.9 million while the Polygon network achieved $31 million in NFT sales.

Network upgrades enhance privacy and reduce pressure on validators

The underlying driver of Solana’s recent 20% price increase is the September 28 network upgrade to version 1.16, which introduced a “gate system” to ensure the gradual activation of new features on the network. This process helps maintain network stability and prevent issues caused by sudden changes.

Another notable change in this update is “Confidential Transfers,” which uses zero-knowledge proofs to encrypt transaction details, thereby enhancing user privacy. The version also includes improvements to RAM usage for validators, resizable data accounts, and a mechanism for identifying corrupted data.

Overall, this update brings greater efficiency, privacy, and security to the Solana blockchain, marking a major milestone in its development.

Fierce competition from Ethereum layer 2 solutions

Despite Solana’s competition with other blockchain networks, there is no doubt that Ethereum layer 2 solutions have gained more traction in terms of total value locked (TVL) and activity. For example, according to DeFiLlama, Arbitrum holds $1.73 billion in TVL and Optimism holds another $637 million, both significantly better than Solana’s $326 million.

While Solana continues to make progress in privacy, scaling, and security, external factors are at play outside of the FTX bankruptcy drama, which is making the $23 resistance more difficult to break than expected.

Ultimately, investors are still primarily focused on the Ethereum ecosystem, as it remains the leader in developers and integrating decentralized applications.

This article is for general informational purposes only and is not intended and should not be considered legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Author: Deepchain DCNews

Compiled by: Sister Shen

Twitter: DeepChain

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