SOL Recovery: DApp Activity Surges Amidst Volatile Solana Price

Solana’s native token, SOL, has experienced a significant surge of 45% over the course of a week, reaching a high of $210 on March 18. Although SOL’s price hasn’t reached its all-time high of $260 in November 2021, it has still gained 58% in the past 30 days. This performance surpasses that of other cryptocurrencies such as Ether (ETH) and Avalanche’s AVAX, which have only increased by 12% and 30% respectively during the same period. Solana remains the fifth-largest cryptocurrency by market capitalization and the third in terms of total value locked, making a long-term bearish outlook on SOL’s price difficult to support. It’s important for investors to examine on-chain metrics to determine if the bullish trend is likely to continue.

There has been a sudden increase in activity on the Solana network, challenging the notion that the 18% drop in SOL’s price since March 18 indicates a reversal of the bullish trend. On March 20, SOL’s price briefly dipped below $165, but quickly bounced back, showing significant support at that level. With Bitcoin unable to maintain its price above $70,000 and speculation of an altcoin season, both bullish and bearish arguments for SOL’s price have their merits. Critics argue that the increased demand for Solana has led to higher fees and a higher number of failed transactions. Validators have experienced delays of up to 40 seconds, causing nearly half of the transactions to fail within a 20-minute period. This rise in activity is due to the memecoin frenzy, particularly the launch of Book of Meme (BOME) which saw $270 million in trading volume in just 24 hours.

After Ethereum’s Dencun hard fork on March 13, which reduced fees for its layer-2 scalability solutions, competition among memecoin launches intensified. Ethereum’s Base activity saw a 77% increase in DApp volume in a week, making the Ethereum ecosystem more competitive for memecoin launches and potentially diverting attention and spending power away from Solana. Solana’s memecoin decline seemed to begin after the Ethereum network’s upgrade on March 14, with tokens like Dogwifhat (WIF) and Bonk experiencing significant drops.

Despite setbacks, the Solana network has benefited from increased activity, with a 55% surge in volume since March 13, outpacing competitors like BNB Chain and Polygon. It’s important to note that increased activity and volume from memecoins and new token launches don’t guarantee sustained price increases. Projects like Jito (JTO) and Jupiter’s JUP token have experienced drops in price despite their level of adoption. Analysts raise concerns about the substantial issuance of tokens to cover Solana’s validator costs, which effectively inflates the supply of SOL. The large volume of tokens held by the bankrupt FTX exchange’s estate also poses a potential risk of a sell-off in the near future. Despite these factors, Solana’s DApp activity shows no apparent weaknesses, indicating that the $165 support level should hold in the short term.