Why is Sol so successful?

Solana’s token SOL has risen by more than 24% in the past 24 hours, reaching a maximum of $45. It is worth mentioning that SOL has risen nearly 80% in the past 30 days, leading the recent gains.

Analysts believe that it is obvious that SOL’s current rise is a typical short squeeze (note: also known as short squeeze and short squeeze, which mainly occurs due to market supply and demand rather than changes in fundamentals). However, one voice that promotes the rise of SOL believes that Solana rises because it is as good as the Ethereum blockchain and can even replace Ethereum.

Due to the deep binding between FTX and Solana, Solana was particularly hard hit by the FTX crash. FTX has invested in both Solana and many projects built on top of Solana. For example, FTX co-created Serum, a now-defunct DeFi protocol, with the Solana Foundation. In its heyday, Serum was the backbone of Solana’s ecological DeFi.

The Solana Foundation also holds millions of dollars worth of FTX shares and FTT tokens. When FTX fell, Solana suffered losses in two ways: first, the size of the treasury assets shrank, and second, the SOL held by FTX had been handed over to the liquidator, and SOL faced market selling pressure. With the rise of SOL, the value of crypto assets held by FTX has increased by nearly US$1 billion.

However, due to the continuous support of developers (the number of developers grows by more than 40% every year) and more and more Solana believers refuse to close the protocol. The debate over Solana competing with Ethereum has become one of the most heated topics discussed in the crypto community today.

Essentially, Solana’s backers say its technology is faster, more scalable, and cheaper to use than the Ethereum blockchain.

SOL leads gains against BTC, ahead of ETH

Bitcoin is the crypto market leader, and because of this, traders often measure the coin’s price in terms of Bitcoin rather than USD, reasoning that if it can’t rise beyond Bitcoin, then it’s better to put your money in Bitcoin.

Recently, the price action of SOL/BTC has been far more attractive than that of ETH/BTC. In fact, many have noticed that ETH prices are weak compared to BTC.

Traders and speculators are also potentially hinting that Ethereum’s past is Solana’s future, because ETH’s past and SOL’s present are very similar.

From April 2020 to November 2021, the price of Ethereum increased from $100 to $4,700.This comes after ETH experienced its first bear market cycle. During this time, many believed that ETH would disappear like most ICO projects at the time.

But they were wrong. Developers flocked to the Ethereum blockchain, launching tokens and protocols that maintained market attention and transaction volume throughout the bear market. ETH is performing stronger than ever and is one of the best-performing coins in the 2020-2021 bull market.

A similar situation is now being seen in Solana. Because Solana has a very close relationship with FTX, many people believed that Solana had passed its peak after the collapse of FTX. NFT project DeGods even left Solana and moved to the Ethereum network.

Still, developers continue to build and deploy products on Solana, and its resilience has caught the attention of investors as a potential short squeeze.

Patrick Felder, founder and CIO of Prismatic Capital, explained: “All factors were sufficient to cause SOL to surge higher. Everyone has either shorted SOL or discussed doing so after FTX Clearing announced the timetable for selling the assets. ” Patrick Felder invests primarily in ETH, but is increasingly putting money into SOL.

Patrick Felder said that all these shorts created a market imbalance that was exploited by SOL believers. “Things are moving so fast in terms of price. Solana has a believer-like community, so there are a lot of people accumulating SOL for the next bull run. This is a classic short squeeze.”

The Solana developer community is still growing

A key factor in Solana's resistance to short sellers is the fanatical developer community, which not only did not defect after FTX, but continued to grow. At least according to data from European venture capital firm RockwayX, which invested in Solana, the number of developers on the Solana chain actually surged by 83%. Even Ethereum co-founder Vitalik Buterin has publicly expressed support for the Solana developer community.

The number of people developing on Layer 1 blockchain is a key metric. In the crypto space, developers are generally not required to be paid for building on the blockchain, but Solana had to. Because developers don’t know whether the blockchain can continue to operate, and they also have to take the risk of learning the specific development language of the Solana blockchain.

According to the Electric Capitals developer report, Solana currently has nearly 1,000 full-time developers; by comparison, Ethereum has nearly 6,000.

Likewise, Solana’s market capitalization is only 8% of Ethereum’s market capitalization, so Solana still has a long way to go to achieve long-term success. Despite the short squeeze, FTX is not out of the woods yet. Solana also needs to handle the liquidation of FTX assets. FTX’s legacy currently holds $120 million worth of SOL. As the bankruptcy proceeds, these assets will undoubtedly be liquidated.

But those who are optimistic about Solana say that once this problem is resolved, Solana's situation will improve.