Solana’s Recent Price Movement
Solana (SOL) saw a significant increase in value between October 30 and November 2, but it failed to surpass the $44.50 mark and experienced a 10% correction down to $40 on November 6. This has raised concerns among investors about whether the ecosystem growth and network activity justify Solana’s current $16.9 billion market capitalization.
Solana Breakpoint Conference and Development Updates
The peak price of SOL coincided with the Solana Breakpoint 2023 conference held in Amsterdam, where the Solana Foundation announced the testnet launch of Firedancer. This new client aims to improve speed, reliability, and reduce hardware requirements for validators, addressing a long-standing criticism of Solana’s layer-1 blockchain.
In addition, the Solana Foundation made its network dataset available on Google Cloud BigQuery, allowing developers and companies to access archival data and analytical insights securely.
On the development front, the foundation approved the v.1.16 update in September, which introduced confidential transactions for SPL tokens using zero-knowledge proofs.
Challenges Faced by Solana
Despite Solana’s price performance, there have been some setbacks. For example, Lido Finance decided to cease operations on the network due to unsustainable financials and low fees.
Furthermore, Solana’s on-chain activity and metrics related to decentralized applications (DApps) raise concerns. The total value locked (TVL) in Solana’s smart contracts reached its lowest level in over two years, and DApp deposits decreased by 30% in 30 days.
Solana’s largest DEX, Raydium, recorded only 17,380 active addresses in the past 30 days, while its most widely used game, Star Atlas, had 12,420 unique addresses during the same period. In comparison, other networks like BNB Chain and Avalanche have higher user activity and DApps volume.
There are also criticisms about the need for KYC and AML requirements for network validators, as well as concerns about centralization due to a large number of validators receiving delegations from the Solana Foundation or Alameda.
Solana’s On-Chain Activity Does Not Support Price Increase
Considering these challenges and discrepancies in on-chain activity, it is questionable whether Solana’s recent price surge can be sustained. The current data suggests that further price increases may not be supported by the network’s fundamentals.
Hot Take: Solana’s Price Surge at Odds with On-Chain Activity
The recent surge in Solana’s price has raised questions about whether the network’s on-chain activity and ecosystem growth justify its market capitalization. Despite positive developments like the launch of Firedancer and making network data available on Google Cloud BigQuery, Solana faces challenges such as low DApp activity and a decrease in total value locked.
In addition, concerns have been raised about the centralization of validators and dissatisfaction among SOL token holders. These factors suggest that Solana’s recent price surge may not be sustainable in the long term.
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