In September, Solana (SOL) reached a record high of $216 after rising 508% since August. The upward movement has led some analysts to expect a target of $500, which equates to a market capitalization of $150 billion.
It is worth noting that during the SOL rally, the average transaction fee on the Ethereum network exceeded $40. Increased interest in the NFT market has accelerated the transition to investors in Solana, helped by the launch of the NFT FTX market on September 6.
Solana, Avalanche and Cosmos price on Binance. Source: TradingView
The chart above shows SOL’s 2-month performance against Avalanche (AVAX) and Cosmos (ATOM). Both are fighting for the same decentralized application user base and offer faster and cheaper transactions compared to Ethereum (ETH).
Major players in the industry have also invested in the Solana ecosystem due to the potential of Ethereum. In June, Andreessen Horowitz and Polychain Capital led a $314 million funding round in Solana Labs, which was also funded by venture capital firm Andreessen Horowitz, Polychain Capital and Alameda Research.
Does Solana’s ability lag versus the price of SOL?
At the SALT 2021 conference, Solana founder and CEO, Anatoly Yakovenko, told Cointelegraph that the network is “optimized for a specific use case: the central online book with limited orders is a trading method used by exchanges that matches orders with offers. It is designed for marketers who need to send Millions of transactions daily.”
Yakovenko then added, “There are trade-offs in Pareto efficiency. If I improve hash power security, then I can’t get much TPS. You have to choose one or the other.”
Strangely enough, on September 14, Solana’s network experienced a power outage that lasted for more than 12 hours. The team explained that the massive increase in transaction load to 400,000 per second led to network congestion, resulting in a denial of service forcing validators to refuse.
Solana Futures is an open public interest. Source: Bybt.com
Despite the recent decline, total open interest in Solana’s futures markets reached $1 billion, an increase of 640% over two months. This number makes Solana’s derivatives market the third largest after Bitcoin (BTC) and Ether. This data confirms investor interest, but cannot be called optimistic, because futures buyers (long) and sellers (short) synchronize all the time.
Derivatives markets indicate a balanced state
To answer this question, it is necessary to analyze the amount of financing. Perpetual contracts, also known as reverse swaps, have an internal rate, which is typically charged every eight hours. This commission ensures that there are no currency risk imbalances. A positive funding rate indicates that long positions (buyers) require greater leverage.
However, the opposite situation arises when short positions (sellers) require additional influence, and this causes the funding rate to become negative.
Solana Perpetual Futures with a financing price of 8 hours. Source: Bybt.com
As shown above, the eight-hour commission peaked at 0.12% on September 5th, which equates to 2.5% per week. This short-lived increase quickly ended when SOL experienced extreme volatility on September 7. After peaking at $195, SOL fell 35% in 9 hours and closed positions with leverage, resulting in a current equilibrium between long and short positions.
The data does not indicate that investors are in a rush to add long positions with the approach despite the open interest of $1 billion. In addition to the 410% gain over the past two months, traders have reason to fear further declines as Bitcoin failed to break the psychological barrier of $50,000, and whether the recent dip below $40,000 is a bottom remains to be confirmed. short term. … …