Solana's native token SOL (SOL) rallied 13% between July 14 and July 16, breaking above the $160 resistance level for the first time in five weeks. However, SOL's price remains 24% lower from its $209 peak in March, leaving little room for celebration among bulls. Traders now question the sustainability of the uptrend and the odds of retesting the $180 level in the near term.
Solana memecoin frenzy and Ether ETF momentum
The recent excitement around SOL can be partially attributed to the final phase of Ether exchange-traded funds (ETFs) approval. According to Bloomberg analyst Eric Balchunas, the US Securities and Exchange Commission (SEC) has reportedly delivered final instructions to asset managers as it prepares to launch on July 23. VanEck and 21Shares filed for a similar Solana ETF application on July 8, although a final decision from the SEC is expected by March 2025.
A significant part of Solana's ecosystem consists of memecoins, thanks to the network's low fees for launching and trading. This has led to the success of memecoins like BONK and DogwifHat (WIF), which achieved peak market capitalizations of $2.8 billion and $4.8 billion, respectively. More importantly, Solana has been able to build an active and engaged community, which is not easily replicable.
Several Solana SPL memecoins have presented impressive gains over the past 7 days, including MICHI (up 71%), POPCAT (up 70%), MYRO (up 36%), and TRUMP (up 30%). These movements incentivize the entrance of new investors and subsequently increase the demand for SOL tokens due to increased decentralized applications (DApps) activity and enhanced liquidity in the Solana ecosystem, including its total value locked (TVL).
Solana is currently the second-largest blockchain in terms of decentralized exchanges (DEXs) volumes, and it is closing the gap with the market leader Ethereum (ETH).
Ethereum's average transaction fee of $2.3 poses an unfair competition, but Solana DEX activity stands out even when compared with Arbitrum and BNB Chain, which share the benefit of extremely low costs. It is also worth noting that Base, an Ethereum second layer, which also became known for memecoin and token launches, has seen declining volumes. After peaking at a 10.8% weekly market share on June 8, Base is now down to 3.6%, according to DefiLlama data.
Solana TVL growth and SOL futures markets premium
Solana's activity growth is also reflected in its total value locked (TVL), surpassing BNB Chain. A higher deposit base is typically considered bullish as it increases network security and contributes to a positive feedback loop, attracting more users and developers and driving up token valuation and potential for growth.
Highlights on the Solana network include Jito, a liquid staking solution, whose TVL increased 14% in 30 days, and Kamino, a lending and leverage solution, which gained 12% in deposits in the same period. Lastly, Jupiter Perpetual, a DEX aggregator, experienced a 28% growth in TVL over the past 30 days. As a comparison, leading BNB Chain DApps PancakeSwap and Venus faced a 7% and 5% TVL decline in the same period, respectively.
Related: Institutions are more bullish on Ether than retail ahead of ETH ETF launch
Lastly, one should analyze SOL's futures markets. The SOL futures premium reflects the difference between the monthly contracts’ derivatives prices and the spot level on regular exchanges. Typically, a 5% to 10% annualized premium (basis) occurs to compensate for the extended settlement. In essence, a higher premium suggests that traders are willing to pay more for future contracts, indicating bullish sentiment.
The SOL futures premium currently stands at 12%, which has been the norm for the past couple of days. This indicates a cautiously optimistic sentiment among traders, which is especially relevant since SOL gained 25.7% over the past eleven days. Considering the vibrant Solana network activity and derivatives metrics, SOL has what it takes to continue its gains toward $180.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.