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SOL price is more than 60% away from its all-time high and data shows that it's not the network outages but the loss of territory to competing chains driving the correction.
The past couple of months have not been kind to cryptocurrencies. The sector's aggregate market capitalization plunged 50% from a Nov. 10 peak at $2.87 trillion to the current $1.44 trillion. Solana's (SOL) downfall has been even more brutal, presently trading at $88 after a 66% correction since its $260 all-time-high.
Pinning the underperformance exclusively to the recent network outages seems too simplistic, and it doesn't explain why the accelerated decoupling over the past week, so let's take a look at what might be going on.
The Solana network suffered four incidents in the span of a few months. According to the project's developers, a sudden spike in the number of computing transactions caused network congestion which crippled the network.
Interestingly, the network struggles with congestion since the developers advertise a 50,000 transaction per second (TPS) capacity. The latest incident on Jan. 7 has been attributed to a distributed denial-of-service (DDoS) attack, but data shows us that network attacks are less relevant than dApps use.
Cyber Capital chief investment officer Justin Bons criticized the network's security, mentioning that DDoS can be used to "temporarily gain proportional-staked control over the network by attacking other stakeholders."
Sergey Zhdanov, chief operating officer of crypto exchange EXMO UK, also said DDoS attacks and similar outages "don't really influence the trust of the network" and should be disregarded. Zhdanov makes a point comparing Ethereum network fees surpassing $50 as a similar hiccup, but not significant enough to cause investors to abandon it for good.
Solana's main decentralized application metric started to display weakness earlier in November after the network's total value locked (TVL), which measures the amount deposited in its smart contracts, began to linger at $15 billion.
Notice how Solana's dApp deposits saw a 44% decrease in 3 months, as the indicator reached its lowest level since Sept. 8. As a comparison, Fantom's TVL currently stands at $9.5 billion, a 79% increase in 3 months. Another dApp scaling solution competitor, Terra, saw a 60% TVL hike to $16 billion.
Not even the $10 million raised by Solana's decentralized finance (DeFi) application Hubble Protocol in early January was enough to recover investors' confidence. Crypto heavyweights like Three Arrows, Digital Currency Group, Delphi Digital and Crypto.com Capital backed the launch of the crypto-backed stablecoin and zero-interest borrowing platform.
Total value locked is no longer the primary metric that reflects strong fundamentals, meaning a 66% price correction has other factors at play than just a reduced TVL. To confirm whether dApps use has effectively decreased, investors should also analyze the number of active addresses within the ecosystem.
As shown by DappRadar data on Jan. 28, the number of Solana network addresses interacting with most decentralized applications dropped by 18% to 32%, except for the non-fungible token (NFT) marketplace Magic Eden.
The lesser interest on Solana dApps was also reflected in its futures open interest, which peaked at $2 billion on Nov. 6, but recently faced a steep correction.
The above chart shows how derivatives traders' interest in Solana plunged 75% in less than 3 months. That is especially concerning because a smaller number of futures contracts might reduce the activity of arbitrage desks and market makers. For example, it is common for participants to self-limit their exposure to 20% of the asset volume or open interest.
It's probably impossible to pinpoint the correlation and causation between SOL's price drop, the decrease in the network's dApps use, and the fading interest from derivatives traders. However, none of those indicators point to a price recovery anytime soon.
The data above suggests that Solana holders should be less concerned about momentary outages and focus on the ecosystem's use versus competing chains. As long as the ecosystem remains healthy, investors have no reason to lose trust due to temporary network outages.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
The Solana blockchain has reportedly suffered another DDoS attack that temporarily clogged the network, however the network appeared to remain online.
Solana's blockchain performance was reportedly hit by a distributed denial of service (DDoS) attack over the past 24 hours, however the network appears to have remained online throughout.
A DDoS attack generally refers to a large number of coordinated devices, or a botnet overwhelming a network with fake traffic to take it offline.
This wouldn't be the first time Solana has suffered this issue, with Cointelegraph reporting in September that the network suffered a 17-hour-outage due to mass botting activity for an initial DEX offering (IDO) on Solana-based DEX platform Raydium.
The latest DDoS attack was highlighted by Solana-based NFT platform Blockasset on Dec. 9 around 3 pm UTC, after it noted that:
“We are aware tokens are taking a long time to distribute. The Solana chain is being overloaded with DDoS attacks which have clogged the network causing delays.”
Solana-focused infrastructure firm GenesysGo also reported on the matter, stating that the validator network was experiencing issues with processing transaction requests, but called for calm as it attributed the problem to “growing pains.”
The #Solana validator network is experiencing issues this morning. TPS issues as the network works to process txn requests.
— GenesysGo.sol - Shadowy Super Coder DAO (@GenesysGo) December 9, 2021
Remember, this is blockchain If your txn ID went through then it’s not lost, just pending. Growing pains is all! pic.twitter.com/2Zfagq092M
At this stage, the nature of the incident is unclear as Solana Foundation is yet to publicly confirm any attacks, while Status.Solana shows that the network has not suffered any outages and is fully operational at the time of writing.
However multiple accounts on Twitter asserted that Solana suffered a global outage, with Verbit CEO Roy Murphy (and BSV proponent) stating that “Solana crashed again and is currently offline. Engineers are looking into ‘rebooting the system.’ Seriously, you can't make this shit up!”.
Earlier today members of the r/Solana subreddit attributed the network clogging to another IDO launch on Raydium, with user “u/Psilodelic” writing a post titled “Why do Raydium IDOs clog the Solana network and what is being done about this?”.
“My biggest concern about Solana right now is the performance impact during high volume activity connected to Raydium IDOs and launches. Literally every single performance issue in the past 6 months, including the 17-hour outage, has been a result of a launch on Raydium,” they wrote.
Related: Decentralized and scalable exchange leverages Solana for an improved trader experience
In response, one of the group’s moderators “Laine_sa” didn’t explicitly confirm if the Solana’s network’s issues were once again Raydium related, but did note there have been concerted “stop gaps” put in place to keep Solana online since the DDoS attack from September:
“Right now there's a stop-gap in place that prioritizes vote transactions to prevent a full crash, there are additional changes to compute limits and fees relating to this in the works but it's not a quick fix that can be rolled out in a few weeks which is why it's taking time. It's being looked at however.”
Cointelegraph has reached out to multiple Solana developers for comment on the DDoS attack, and will update the story if they respond.
According to data from Coingecko, the price of Solana (SOL) has dipped 6.4% over the past 24 hours to sit at $182.79 at the time of writing. Amid a pullback across most of the top crypto assets, SOL has fallen 26.1% over the past 30 days.
Derivatives data shows institutional demand remains strong for SOL, and on-chain data points to a rally to $250.
Solana (SOL) price is meeting resistance near its all-time high again, but solid fundamentals and the impressive growth of its decentralized finance (DeFi) and non-fungible token (NFT) ecosystem are likely to drive the altcoin above $250 before year-end.
Institutional investor interest is likely a key factor behind Solana’s impressive 490% gain since August. For example, SOL is the fourth largest Bitwise 10 Crypto Index Fund ($BITW) component, which overall is a $1.3 billion over-the-counter tradable market instrument.
Traders should remember that this event is not necessarily positive since futures contracts require both a buyer (long) and a seller (short). Nevertheless, the increasing interest allows even more substantial players to participate.
Solana’s two most prominent decentralized finance projects are decentralized exchanges with built-in yield generation programs and they hold nearly $2 billion total locked value each.
Saber (SBR) is an automated market maker (AMM) protocol that trades between stable pairs and synthetic assets and provides yields for the platform’s liquidity providers. Meanwhile, Raydium offers a decentralized exchange, yield farming, and liquidity pools.
Evidence of institutional investors’ appetite for Solana was the $12 million weekly inflow in mid-October, as reported by CoinShares recently. In the same week, the United States registered branch of FTX exchange announced support for the Solana blockchain, enabling users to trade, deposit and withdraw NFTs that conform to the Metaplex token standard.
This positive newsflow has been reflected on Solana’s derivatives markets, as depicted by the aggregate futures open interest data below:
The indicator reached a record-high $1.86 billion on Oct. 25, which is a 123% increase in 30 days. To put things in perspective, Cardano (ADA) and Polkadot (DOT) currently hold a $900 million futures open interest.
Traders should acknowledge that this event is not necessarily positive since futures contracts require both a buyer (long) and a seller (short). Nevertheless, this increasing interest allows even more substantial players to participate.
Another positive factor is that DeFi protocols maintain a $13.5 billion total value locked (TVL) even though the sector took a substantial hit after the 17-hour network outage during Sept. 14 and Sept. 15.
The Solana Foundation stated that bots spammed the network as Grape launched its IDO on the Solana-based decentralized exchange (DEX) Raydium. That activity overwhelmed the processing capacity with a transaction load of 400,000 per second, requiring a coordinated hard fork by validators to ignore the spam requests.
VORTECS™ data from Cointelegraph Markets Pro also began to detect a bullish outlook for SOL on Oct. 20, nearly 24 hours ahead of the 15% pump that led to $210.
The VORTECS™ Score, exclusive to Cointelegraph, is an algorithmic comparison of historical and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.
Data illustrates that the current number of tweets from unique accounts discussing Solana is 32% higher than the 30-day average. Tweet volume is one component of the VORTECS™ score that identified bullish conditions for SOL on Oct. 20.
As long as Solana’s ecosystem expands, the network remains a viable solution for DeFi and NFT applications looking for cheap and fast transactions. Both onchain and derivatives indicators signal that $250 SOL by year-end is totally feasible.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Five years ago, there was a large quantity of digital currencies and blockchains, but there were very few trading platforms that dealt with decentralized exchange. Since the boom of decentralized finance (defi), there’s now a myriad of decentralized exchange (dex) platforms that allow people to swap funds in a private, non-custodial manner. These days the […]
SOL price continues to climb, with Solana’s TVL also hitting a new high of nearly $14 billion.
The price of Solana’s native SOL coin edged up on Oct. 25 in the wake of a marketwide rally led by Bitcoin (BTC), with the total value locked (TVL) on Solana hitting record highs and SOL’s price seeing a promising technical setup.
SOL climbed by more than 6% to hit an intraday high of around $214. The price of SOL is now up a little over 35% over the past week, pushing it closer to its record high of about $222 set in early September.
Bitcoin’s run-up to its new record high of $67,000 last week resulted in the total crypto market capitalization passing the $2.5-trillion mark, a new milestone for the cryptocurrency.
That helped push SOL higher, with rival cryptocurrencies Ether (ETH) and Cardano’s ADA also jumping by over 10% and 1% in the past week, respectively.
The SOL price rally also appeared as the TVL of all the decentralized finance (DeFi) projects built on the Solana blockchain reached a new record high of $13.53 billion, as per data aggregator service DeFi Llama.
The most dominant DeFi project on the Solana blockchain is Saber, an automated market maker (AMM) protocol that enables Solana users and applications to trade between stable pairs of assets efficiently and earn yields by providing liquidity to the platform.
Its contribution to the Solana liquidity pool was $2.05 billion at press time.
Meanwhile, there are four other DeFi projects with a TVL of more than $1 billion. These include Raydium ($1.91 billion), Sunny ($1.73 billion), Serum ($1.69 billion), and Marinade Finance ($1.63 billion).
Solana also declared that it would add more DeFi projects to its list after the completion of its “Ignition” hackathon on Oct. 18. Users would need to hold SOL tokens to use these applications, to pay for transaction fees, thus raising the prospect of the token’s higher demand in the future.
SOL’s latest price rally came as part of a breakout move out of what appears like a Bullish Pennant. As Cointelegraph reported earlier, the technical outlook aims to send SOL to levels equal to the maximum distance between the Pennant’s upper and lower trendline around $85.
As a result, adding $85 to the breakout level around $158, the SOL price’s Pennant target is $243, i.e., almost $250. Meanwhile, a retest of the pennant’s upper trendline as support would risk invalidating the bullish setup.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
On September 17, 2021, Solana protocol fans were introduced to the launch of the Wormhole Network’s ethereum – solana bridge, which means assets between each chain can be intermingled. The launch announcement notes that Saber, the Solana-fueled protocol with more than $4 billion total-value locked (TVL), will support migration from Wormhole V1 to V2. Wormhole […]