Solana’s native token (SOL) experienced an impressive 22% surge on November 10, surpassing the $54 mark for the first time since May 2022. Notably, this surge occurred against the backdrop of continued sales of SOL tokens by the FTX bankruptcy estate. The Delaware Bankruptcy Court approved the sale of failed exchange FTX assets in September 2023, including 55.75 million SOL.
Investor enthusiasm for SOL’s rising price may be attributed to some of the tokens vested or locked up in the bankruptcy proceedings. Additionally, there is a weekly sales limit of $100 million as part of FTX’s liquidation program. Essentially, initial fears of asset liquidation have turned to hope as investors realize the sales will have limited impact.
The selling price of FTX is between 250,000 and 700,000 $SOL Every day for the past two weeks has been up or sideways.
So far it’s been like a champ, and at the current rate their unlock tokens should be depleted within a week.
Once this seller is gone I can… pic.twitter.com/AtnTqz3uxG
— Bluntz (@Bluntz_Capital) November 9, 2023
As trader and independent analyst “Bluntz” aptly described the situation, SOL’s ability to recover during the FTX bankruptcy token sell-off was impressive. A post on X (formerly Twitter) adds to the bullish case for SOL, stating:
“Once this seller is gone, I can only imagine how difficult it will be.”
Strong demand from leveraged longs drives SOL price higher
SOL’s sharp weekly gain of 39% pushed its futures open interest to $745 million, the highest level since SOL hit an all-time high of $260 in November 2021. Still, in the futures market, leveraged longs and shorts are constantly matched up, so it’s crucial to check SOL’s funding rates to get a more nuanced perspective.
A positive funding rate shows that longs (buyers) require more leverage, while the opposite is true when shorts (sellers) require additional leverage, resulting in negative funding rates.
SOL’s current futures funding rate represents a weekly cost of 0.5% for a leveraged long position, which is not too high given the current bullish momentum. However, this is a significant shift from funding rate levels observed three weeks ago when leveraged shorts were paying for the use of leverage.
While it could be argued that SOL’s rise has been driven primarily by derivatives markets, there is solid evidence of growth in deposits and decentralized application (DApp) usage within the Solana ecosystem.
In addition to derivatives, Solana’s ecosystem has also shown solid growth
Solana’s total value locked (TVL), which measures the amount deposited in its smart contracts, reversed a downward trend after six consecutive weeks.
Solana’s DApp deposits have increased by 10% in the past three days. Although the current level of 11.1 million SOL is still lower than the 30 million SOL before the FTX exchange went bankrupt, recent trends indicate that the worst of the Solana network may be over.
To confirm that this movement is not simply driven by a few large holders exaggerating TVL, it is necessary to analyze the number of users using active addresses as proxies.
Solana is currently the fourth largest blockchain in decentralized finance (DeFi) TVL, with a 28% increase in the number of active addresses. Interestingly, the surge in activity has coincided with a decline in competitors, with market leader Ethereum seeing a 22% drop in DeFi active users, according to DappRadar data.
related: 3 arguments that will drive Ethereum and Bitcoin into the next bull run
On the one hand, SOL token bulls have benefited from increased network activity and higher TVL, while on the other hand, Solana’s current market cap of $22.8 billion has nearly tripled Polygon’s $7.8 billion, despite both networks having comparable DeFi TVL. This prompted investors to question the sustainability of SOL’s bull run above $54.
Additionally, according to DefiLlama, the Solana protocol’s cumulative 30-day fee is $1.9 million, while Polygon’s is $1.6 million. However, these numbers pale in comparison to BNB Chain’s $9.1 million, raising questions about valuation following SOL’s recent rise.
As of now, there is no obvious reason to argue against this trend, as no excessive demand for leverage has been observed in the SOL derivatives contract. Nonetheless, fundamentals suggest further upside is limited.
This article is for general information purposes only and is not intended to be, and should not be construed as, legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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