Solana (SOL) surged 22.5% from November 5 to November 7, reaching its highest level in seven months. This price increase is similar to the upward momentum of other altcoins, as Bitcoin reached its all-time high on November 7.
A significant part of this price rally could be explained by the victory of President-elect Donald Trump in the U.S. presidential election and the Republican Party gaining majority control in the Senate, which may signal more innovation-friendly regulations in the cryptocurrency space.
The increased demand for SOL accompanies a rise in leveraged positions, with the total open interest for Solana futures reaching an all-time high on November 7. Although the risk of forced liquidation increases if SOL prices adjust, derivative data indicates further growth potential.
Total open interest in Solana futures, SOL | Source: CoinGlass
Open interest in SOL futures rose to 21.1 million SOL on November 7, an 11% increase from the previous week and reaching a new nominal high of $4 billion. This reflects strong acceptance of SOL derivative instruments, indicating growing institutional interest but also potential risks.
Large positions in futures contracts can be monitored, leading to large investors (whales) becoming targets for those looking to profit from short-term market fluctuations. However, in derivative markets, long and short positions are always balanced, indicating that the funding rate may be a window into which side is seeking greater leverage.
8-hour average funding rate of Solana | Source: CoinGlass
Currently, the 8-hour funding rate for SOL is at 0.017%, equivalent to about 1.5% per month – a sign of neutral to optimistic sentiment. Typically, during periods of market excitement, the leverage costs for long positions can rise to 2.1% or higher, so the current rate indicates moderate optimism, which could support further gains.
Strong on-chain metrics support continued growth for SOL
Some analysts suggest that SOL's recent price surge is largely due to the explosion of memecoins. Platforms like Pump.fun and the decentralized exchange (DEX) Raydium have seen significant increases from the memecoin craze. However, broader developments in the Solana ecosystem could push SOL prices to $200 and beyond.
Critics like 'CatfishFishy' point out the potential for 'pump and dump' schemes by a small group of wealthy investors holding a large portion of the supply and using influencers and paid advertising. The article also mentions that part of the TikTok audience is underage, raising concerns about regulatory oversight.
The speculation that memecoins are the main driver behind SOL reaching $194 overlooks other important factors such as Solana's total value locked (TVL), which reached $6.64 billion on November 7, a 22% increase from the previous month according to DefiLlama data. Significant growth has been recorded in areas such as liquidity staking, perpetual futures, leverage, and lending, and other areas beyond memecoins.
As long as on-chain metrics remain strong and SOL derivative instruments show no signs of fear or excessive greed, Solana's competitive advantage – offering fast transactions and relatively low costs – will continue to act as a 'free advertising campaign' and significantly attract users thanks to Bitcoin's record highs.
Overall, there are no signs of weakness, indicating a clear path for higher SOL prices.
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