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Solana could run harder as we move towards ‘SOL 2.0’

Mathieu Ziaei
Mathieu Ziaei

by Mathieu Ziaei, Portfolio Manager & Risk Officer at Criptonite Asset Management

Solana (SOL) is known as Ethereum’s (ETH) direct competition. It was the only chain that had volumes anywhere near Ethereum during the last bull run, with many projects being built on it.

Solana was a rising star reaching an all-time high of $260 before coming back down to sub $10 earlier this year, but can it repeat those dizzy previous highs? It has had a bullish run in the past month and the momentum keeps on going. It is up more than 35 % since the beginning of November alone.

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However, there are a few things to keep an eye out for. FTX – the cryptocurrency exchange that recently went bankrupt – moved more than 300,000 SOL tokens, worth in excess of $10 million.

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This action by FTX has left the question open… is FTX selling its tokens or is this just market noise?

$10 million might seem like a large amount, but the fact is that this alone would no cause a significant effect on the price, except if everyone reacts to this news negatively.

There are a few reasons to explain this phenomenon in my opinion:

  • A very negative past: during 2022, Solana experienced a series of very negative events which heavily affected its price. As mentioned above, at the lowest point Solana was down 97% from its all-time-high (ATH), meanwhile ETH “only” suffered an 82% drawdown. This extreme reaction is probably causing a catch up on the price.

  • Solana is still down 76% from its ATH, while ETH’s value is down 56%.

  • A fundamental change is that Solana did not market its “ETH 2.0” moment while bringing significant innovations to its chain. The team is still pushing things to get “Sol 2.0” up and running in the coming months. The rally leading to this anticipated moment could be close to what we saw with ETH switching from its Proof of Work consensus mechanism to Proof of Stake.

  • The Solana conference in Amsterdam earlier in November helped Solana gain momentum price wise.

  • The recent report by VanEck, where they predicted the price of Solana by 2030, also added fuel to the fire with their bullish price scenario of $3,200 a token.

  • The FTX Estate also agreed to stake 5.5 million SOL tokens, which should lower selling pressure in the short term.

  • SOL has seen some significant real-world enterprise adoption of its technology with Solana PAY being integrated with Shopify payments in order to transform e-commerce. Some 10% of online purchases goes through Shopify.

  • Solana has also partnered with Google Cloud and Amazon web services.

  • Finally, we are seeing a rise in volume of Solana NFTs in the past few weeks.

Solana blew very rapidly through its resistance at $44-$45 dollars to hit $63. In my opinion Solana went too high, too quickly for us not to see a small pullback. I think this was due to the euphoric sentiment around Solana at the moment, this small pullback to current levels is quite normal as people “sell the news”.

We could see some sideways movement between $44 to $77 and then possibly be able to see highs around $80 in the near future, as long as we hold the past resistance around the $44 zone, which should now act as support.

The main reason I think SOL can go higher is the DeFi narrative. There are a lot of projects that have been built on the Solana ecosystem and these projects will have airdrops that could then be swapped from their native token to SOL. I believe that the price still has a lot of catching up to do following its huge declines in the previous Crypto Winter, but of course there are no guarantees!