Solana (SOL) reverses decline after rising over 36% in price

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Between October 30 and November 2, the price of SOL increased significantly by 36.6%. However, the failure to break through the $44.5 mark resulted in a 10% correction to $40 on November 6. The move has many investors wondering whether ecosystem growth and network activity will support Solana’s current market capitalization of $17 billion.

The peak of $44.5 reached on November 2 was the highest level reached by SOL since August 2022 and coincided with the Solana Breakpoint 2023 global conference in Amsterdam. The price hype of this period even led BitMEX co-founder Arthur Hayes to admit to being a “degen” (someone with a particularly risky investment strategy) and invest in SOL, despite considering the token “just a meme.”

During the Breakpoint conference, the Solana Foundation responded to criticism by revealing the testnet launch of Firedancer, a new client designed to increase speed, reliability and reduce validator hardware requirements. We have long been talking about layer 1 blockchains that provide parallel computing for smart contracts.

Additionally, on October 31, the Solana Foundation announced the availability of its network dataset on Google Cloud BigQuery, a serverless data warehouse solution that integrates machine learning and artificial intelligence. This enables developers and companies to access stored data and analytical information in a transparent and secure manner.

On the development front, the Solana Foundation maintains a steady level of activity. Typically, validators adopted the v.1.16 update in September, which introduced the use of zero-knowledge (ZK) proofs for confidential transactions of SPL tokens on the Solana network.

However, despite Solana’s good price performance, not all the news is positive for Solana. For example, on October 17, the decentralized liquidity staking protocol Lido Finance announced its decision to shut down network operations, citing unsustainable finances and low fees, leading the community to vote to terminate services.

The next core question is whether the activity and on-chain metrics related to decentralized applications (DApps) support a price increase for SOL? Therefore, it is worth analyzing Solana’s on-chain data and ecosystem growth compared to its competitors.

Total value locked and active fail Solana reduction poses significant risks

Solana’s main DApp index began to show weakness in September, when the network’s total value locked (TVL), which measures the amount of smart contract deposits, hit its lowest level in more than two years on November 5.

sol

Total value locked belong Solana | Source: DefiLlama

Notably, deposits on the Solana DApp dropped by 30% in 30 days to 9.83 million SOL. In comparison, Ethereum ETH’s TVL fell by 2% over the same period, while BNB Chain fell by 8%.

Additionally, Solana’s low fees and continued growth after the FTX-Alameda Research disaster don’t necessarily lead to a large number of active users. Solana’s largest decentralized exchange (DEX), Raydium, recorded only 17,380 active addresses in the past 30 days. Likewise, Solana’s most widely used game, Star Atlas, had 12,420 unique addresses during the same period.

In comparison, BNB Chain’s DEX PancakeSwap has 513,060 active addresses in the past 30 days, and Stargate Gaming has 106,400 users. Meanwhile, Avalanche’s DEX Trader Joe has gained 54,130 active addresses, and top game Galxe has 32,040 unique addresses.

Perhaps more worryingly, DappRadar reported that Solana’s DApp transaction volume reached $609 million in the past 30 days. This number pales in comparison to BNB Chain’s $11 billion, Polygon’s $5.3 billion, and Avalanche’s $727 million in DApp transaction volume.

sol

Dapp volume ranking (30 days – USD) | Source: DappRadar

In addition to these issues, as user StakeWithPride noted, there are also criticisms about network validators requiring identity verification (KYC) and anti-money laundering (AML). emphasize on social networks.

What is even more worrying is that social media user X arixoneth revealed that out of 1,997 validators, 1,818 are authorized by the Solana Foundation or Alameda, accounting for nearly 90% of the total.

These participants were granted 106 million SOL from the two entities mentioned above, raising questions among SOL holders about centralization and dissatisfaction, both in terms of validators and development subsidies, and among DApp users compared to other networks. The base is relatively small. Finally, Solana’s on-chain activity contradicts recent price increases and does not support the possibility of further price increases.

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According to Cointelegraph



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