Solana (SOL) opened trading with a 16% increase to reach a price of $187. This growth coincided with Bitcoin's price surge on election day in the US to $74,650, and for many traders, the expected target for SOL is currently at the annual high of $210.
Currently, on-chain data and derivatives market indicators suggest that the momentum for SOL may continue in the short term.
Solana continues to lead in trading volume on decentralized exchanges (DEX), a clear indicator of user activity and transaction fees, two essential factors in driving sustainable growth and encouraging participation from projects and traders.
7-day trading volume market share of DEX exchanges | Source: DefiLlama
Recent data shows that Solana has a distinct advantage over the Ethereum network. Notably, no Layer-2 solution of Ethereum can compete with Solana's weekly DEX trading volume of $11.86 billion, highlighting that low fees alone are not enough to overcome Solana's competitive edge.
Solana's activity stands out, considering the relatively small TVL of the network
In terms of transaction fees, Solana generated $20.5 million in the past seven days, according to a report from DefiLlama, significantly narrowing the gap with Ethereum, which has generated $22.6 million. This close gap becomes notable when considering that Ethereum holds $47.5 billion in deposits, nearly eight times that of Solana's $6 billion.
Ethereum TVL, ETH compared to Solana TVL, SOL | Source: DefiLlama
The amount of deposits on the Ethereum network has slightly increased by 4% over the past three months, reaching 19.8 million ETH on November 5. Meanwhile, the TVL on Solana has risen by 38%, totaling 38.1 million SOL. This difference is partly due to the more concentrated liquidity staking market on Ethereum, while Solana benefits from the growth of Jito, Marinade, and Sanctum platforms.
SOL holders benefit from a 6.5% yield from staking, resulting in 66.9% of the circulating supply participating in the network validation process. In comparison, Ethereum's staking rate is 28.6% and BNB Chain's is 22.4%, thus the available liquid supply for immediate sale is considerably higher on these networks.
Additionally, SOL's inflation rate has decreased from 5.7% to 5.4% over the past three months, according to data from StakingRewards. In practical terms, this change provides higher net returns for participants in the Solana network validation process, responding to previous criticisms about SOL's inflation rate.
The demand for SOL futures contracts is balanced between buyers and sellers
Although Solana's on-chain metrics are quite strong, especially compared to Ethereum and BNB Chain, this does not equate to positive market sentiment. To assess traders' positions, it is essential to analyze the perpetual futures market for SOL. Excitement periods often lead to positive funding rates, indicating that long positions are paying fees to use leverage.
8-hour funding rate of SOL perpetual futures | Source: CoinGlass
Even when the price of SOL dropped to $155 on November 4, the funding rate remained positive, albeit at a low level. This data suggests that traders are at least neutral, if not somewhat optimistic, which facilitates leveraged buying – a crucial factor in pushing the price towards the $210 threshold.
However, it would be unwise to overlook the potential impact of the US presidential election results, as well as upcoming remarks from Federal Reserve Chair Jerome Powell following the interest rate decision on November 7.
