Solana Rallies 26% in a Week. What's Behind the Move?
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Investors' concerns about the sale of FTX tokens were overstated, says IntoTheBlock analyst.
The rise in popularity of the Solana network, a massive influx of funds into digital asset funds, and recent technological upgrades are also likely to have boosted the cryptocurrency's price.
Solana (SOL) rose another 11% on Friday, continuing to outperform the rest of the crypto market despite concerns about a potential sell-off of bankrupt crypto exchange FTX.
Considering the current increase, CoinDesk estimates that the cryptocurrency has risen in price by more than 26% this week. While crypto market leaders Bitcoin (BTC) and Ethereum (ETH) grew by 10% and 3% respectively over the same period. The CoinDesk Market Index (CMI) rose 8%.
“This is some of the strongest buying activity we've seen since July,” David Shuttleworth, research partner at Anagram and former managing director of Binance Labs, told CoinDesk.
What is the secret to the growth of SOL's value?
Last week's gains complement SOL's stunning return as one of this year's best-performing digital assets, up 170% year-to-date. This comes after Solana's future was questioned at the end of 2022 following the spectacular fall of Sam Benkman-Fried - one of the ecosystem's biggest backers and investors.
Meanwhile, a U.S. bankruptcy court last month granted FTX-Alameda permission to liquidate its cryptocurrency holdings, which included Solana's $1.16 billion reserve as of late summer, sparking concerns about a potential token dump. SOL to the market.
“The Alameda FUD turned out to be less threatening than predicted,” Lucas Outumuro, head of research at IntoTheBlock, told CoinDesk.
Recall that last week the FTX fund seized approximately 5.5 million SOL worth $122 million, which weakened investor sentiment.
Outumuro also noted the technical breakthrough of SOL against ETH, which could have contributed to such a sharp rise.
Investors, meanwhile, have begun investing heavily in Solana-focused funds, asset manager CoinShares said, with net gains of $24 million. This was the largest weekly inflow since March 2022 as SOL firmly positions itself as the top altcoin,” said James Butterfill, head of research at CoinShares.
The Solana blockchain has enjoyed increasing online activity in recent weeks, digital asset management researchers 21Shares noted Thursday in a report citing blockchain data from The Block.
The analysis also notes that Solana recently enabled a technology update that reduced the hardware requirements of its validation systems and added the ability to encrypt transactions with zero trust optionally.
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