What’s Driving the Solana Rally?

What’s Driving the Solana Rally?

Following the fall of FTX, Solana dropped as low as $8. It has increased by more than 80% in the past 30 days. How come?

Solana increased by more than 24% in the last day, peaking at $45 dollars. Better yet, it has increased by almost 80% in the last 30 days.

Analysts claim that this appears to be a typical short squeeze. However, the story behind that essentially claims that Solana can not only match Ethereum in quality but also outperform it.

SOL bearers were mocked for a very long period as "Soylana Manlets." Because of the significant mutual investment between FTX and Solana, the network was particularly severely damaged by the FTX scandal. FTX made investments in projects constructed on top of Solana as well. For instance, FTX and the Solana Foundation collaborated to develop Serum, a defunct DeFi protocol that served as the foundation of the Solana DeFi ecosystem in its prime.

FTT tokens and FTX common stock valued at several million dollars are also held by the Solana Foundation. This indicates that Solana suffered when FTX failed because of the reduction in the size of its treasury as well as the transfer of the SOL that FTX held to liquidators.

But because to increasing developer support—its developer base increased by more than 40% annually—and an increasing number of ardent Solana supporters, the company refused to perish. The Solana vs. Ethereum argument is currently one of the most heated discussions on Crypto X/Crypto Twitter.

Essentially, proponents of Solana argue that the proof-of-stake blockchain's innovative technology is more cost-effective, quicker, and more scalable than the Ethereum blockchain. (This provides a more thorough breakdown of the network's foundation in comparison to Ethereum.)

ETH/BTC vs SOL/BTC

Because Bitcoin leads the cryptocurrency market, traders frequently compare the price of coins to the value of BTC rather than the value of the US dollar. They do this because they believe that if you can't outperform BTC, you might as well keep your money in BTC.

Compared to ETH/BTC, the price motion on SOL/BTC has been far more appealing lately. Indeed, a lot of people have pointed out how weak ETH appears when compared to BTC.

The price of Ethereum increased from about $100 to almost $4700 between April 2020 and November 2021. This occurred following ETH's first bear cycle, during which a lot of people predicted that ETH would vanish like the majority of ICOs at the time.

They were in error. Tokens and protocols were launched on ETH, and developers flocked there to stay active and focused throughout the weak market. ETH was one of the best performers of the bull market that ran from 2020 to 2021 and returned stronger than before.

Solana is witnessing a similar story now. Because of its strong connections to FTX, many people thought Solana would never fully recover after the collapse of the exchange. DeGods, its flagship NFT project, even moved from Solana to the Ethereum network.

Nevertheless, developers kept creating and releasing goods on Solana, and investors became interested in its durability as a possible short squeeze.

According to Patrick Felder, founder and CIO of Prismatic Capital, who mostly invests in ETH but has been investing more in SOL, "all the ingredients were there for a huge rip higher." "Everyone was either actively shorting SOL or talking about shorting SOL after the FTX liquidators released their timeline for selling assets."

He claimed that the SOL real believers are taking advantage of the imbalance that all those shorts produced. Things went significantly off course in terms of placement far too rapidly. Due to the devoted residents of Solana, a large number of people are gathering for the upcoming cycle. The setup is a traditional short squeeze."

The passionate developer community of Solana, which not only remained strong after FTX but really expanded, has been important in the company's fight against the short sellers. As to RockwayX, a European venture capital firm that made an investment in Solana, the count of developers on the platform has increased by 83%. Even Vitalik Buterin, a cofounder of Ethereum, openly expressed his support for the developer community.

There's a sincere development community in Solana, according to some wise people, and the chain has a bright future now that the opportunistic money people have been driven out.

A crucial measure is the quantity of developers employed by a layer-1 blockchain. In the cryptocurrency space, developers are not compensated for building on your blockchain; rather, they must decide to do so, taking a chance by learning a language unique to the blockchain when they are unsure of its long-term viability.

In comparison to Ethereum, which has over 6,000 full-time workers, Solana presently employs about 1,000, according to Electric Capitals Developer Report.

Similarly, Solana still has a long way to go before it can present a more convincing case for its long-term viability given that its market capitalization is barely 8% of Ethereum's. Furthermore, it's not quite out of the FTX woods despite the brief squeeze. It still has to cope with FTX's asset disposal. SOL valued at $120 million is presently held by the FTX estate, which will surely liquidate it as the business continues to deteriorate.

However, the Solana bulls assert that once that overhang is resolved, Solana will be the only party involved.

Image credit: decrypt.com