Last week was quite interesting for the crypto community, especially for Solana HODLers as the token upsurged over 60% last week (Dec 24th) and touched $118 for the first time in the last 18 months. The skyrocketing performance shown by $SOL was more like a Christmas treat for the community as the token outperformed giants like BTC & ETH in terms of daily returns and is now positioned as the 4th largest cryptocurrency, priced at $105 with a market cap of $47 Bn.
Let’s dig deeper and understand the cause behind the sudden surge in Solana tokens.
Cause behind the sudden Surge
- Increase in Ethereum’s Gas Fee
Over the previous three months, there has been a 400% increase in active addresses on Solana, while the growth of Ethereum addresses during the same period was only 3%.
A key factor that led to the growth of Solana’s growth in terms of user activity and token price is the increase in the gas fee of Ethereum, its foremost layer 1 competitor. Recently, it was noted that the gas fee on Ethereum Blockchain crossed $10 and some users reported that they were being asked to pay $150 in gas fee for a $50 transaction.
The gas price spiked on Dec 26 and is placed at 30 GWEI at the time of writing. A surge in the gas fee on the leading L1 chain prompted a major chunk of users to explore alternative blockchain networks that account for a lower gas fee.
- MEMEcoin Airdrops
The BONK airdrop’s influence on Solana’s recent surge extends beyond token values, creating a multifaceted impact on the ecosystem. Initially valued at $300, the BONK airdrop experienced substantial growth, with its value reaching an impressive $500,000 over time.
This surge not only heightened the appeal of BONK but also triggered a sales frenzy among holders eager to claim their airdrop rewards. The resulting heightened demand for BONK had a cascading effect on the overall Solana ecosystem, illustrating the interconnected dynamics between token values and user engagement.
Moreover, the BONK rally not only affected the digital asset itself but also had tangible consequences for Solana’s hardware. Solana phones, integrated with a 30 million BONK airdrop, quickly sold out as enthusiasts sought to capitalize on the token’s increasing value. This convergence of digital assets and physical hardware contributed to the scarcity of Solana phones, further amplifying the impact of the BONK airdrop on both virtual and tangible aspects of the Solana ecosystem.
Following the $BONK hype on Solana, several other memecoins like analoS & WIF conducted airdrops on the network. Although these coins spiked in value at launch and then fell drastically, some speculators have managed to make significant returns via trading these coins. By trading analoS, a trader was able to effectively clock 2570% profits with just 30 Solana tokens.
Following the recent surge in user activity on Solana’s network, the network achieved a massive milestone by surpassing its competitor Ethereum in terms of DEX trading volumes.
- Technical Analysis
Solana (SOL) has demonstrated notable resilience and performance in recent weeks, The recent uptrend allowed the token to earn a spot on the top five cryptos list as it overtook XRP and BNB Chain [BNB].
As of the current writing, SOL is exchanging hands at approximately $101, reflecting a modest 20% retracement from its recent zenith at $126.36. A discerning examination of SOL’s technical chart underscores the entry of its price into a domain characterized by heightened volatility, as indicated by the Bollinger Bands. Additionally, the Moving Average Convergence Divergence (MACD) signals a distinctly bullish trend in the market. However, despite the comfort afforded by the recent uptrend, the Relative Strength Index (RSI) for SOL has recorded a descent from the overbought territory.
Currently, SOL is witnessing a selling pressure after touching the recent high. Also, as per the Elliot wave theory, it seems the SOL is currently making its correcting wave, which is quite normal after the recent surge of more than 25% in last week alone. So, the immediate support levels are present at $95, followed by $85. On the higher side, the resistance is present at $110 followed by the recent high level of $125.
Conclusion
Recent developments have propelled Solana’s prominence within the Layer 1 ecosystem. Noteworthy in areas such as meme-coins airdrops, cost-effective gas fees, transaction throughput, and decentralized applications (dApps), the blockchain has garnered substantial attention for Solana across the cryptocurrency landscape.
Despite occasional network downtimes and historical vulnerabilities, the prevailing sentiment anticipates Solana’s potential to emerge as a primary platform for dApps and user onboarding. Solana stands poised to capitalize on this momentum as the broader market undergoes a resurgence. Concurrently, the token’s valuation is undergoing a correction phase, gradually transitioning out of the overbought territory, as indicated by Relative Strength Index (RSI) levels.
