Solana (SOL), the native cryptocurrency of the Solana network, experienced a 7.2% increase on May 6 as it aimed to stabilize at the $156 level. Although SOL failed to maintain that peak, the current price of $152 reflects a 3.8% rise for the day and a 12% increase over the week.
The uptick in SOL’s value can be linked to several factors: a favorable report from a leading investment bank, a significant uptick in usage of the Solana network, and the introduction of native interoperability features on a prominent decentralized exchange.
Increased competition has pressured SOL’s performance
Recently, SOL’s market performance has narrowed the gap with BNB Chain (BNB), the third largest cryptocurrency by market capitalization. This gap widened to a 10-month peak of $28.5 billion on April 30 in favor of BNB, but has since reduced to $18.4 billion.
The competition among blockchains that focus on decentralized applications (DApps) has intensified in recent months. This surge is partly due to Toncoin’s (TON) integration with Telegram and the rise of Ethereum layer-2 solutions like Base and Blast. Despite Solana’s marketing around its capacity and decentralization, persistent issues with failed transactions continue to hamper the network.
Alternative networks that offer cost-effective transactions and incentives for deposits are challenging Solana, especially as the cryptocurrency market contends with various bearish factors. These include outflows from U.S. spot Bitcoin exchange-traded funds (ETFs), regulatory actions against cryptocurrency mixing services, and a generally tougher stance from lawmakers.
For example, on May 1, U.S. Senators Elizabeth Warren and Angus King expressed concerns in a letter about potential national security risks posed by cryptocurrency miners in Iran. Moreover, in an April 24 interview, U.S. Representative Maxine Waters revealed that the Financial Services Committee was developing legislation concerning stablecoins and bank clawbacks.
Amid such challenges, SOL’s 12% weekly gains are particularly notable. Part of this positive shift in sentiment may be due to a May 2 report by asset manager Franklin Templeton titled “Solana: Accelerated Adoption”. This report underscores the substantial increases in ecosystem fees, the successful airdrops of major Solana SPL tokens, and innovative use cases.
The report commends Solana for addressing its congestion issues, highlighting Firedancer, a validator client developed by Jump Crypto, designed to boost network scalability and performance. Franklin Templeton’s ongoing interest in Solana centers on recent enhancements in functionality such as NFT compression, decentralized prediction markets, and central limit order books.
More recently, on May 6, JupiterExchange, a prominent decentralized exchange on the Solana network, announced the integration of CloneProtocol into its routing system. This integration allows Jupiter users to trade non-native Solana assets like Arbitrum (ARB) and Sui (SUI) seamlessly, without the need for bridges. The system introduces “cloned assets,” a new liquidity pool exclusively using USD Coin (USDC), which mitigates risks for liquidity providers.
Solana network’s activity picks up, paving the way for SOL price growth
In addition to ongoing development within the ecosystem, the Solana network has seen an uptick in activity and deposits. The network’s total value locked (TVL), a metric indicating the amount held in decentralized applications’ (DApps) smart contracts, reached its highest point since October 2022.
Solana’s TVL in SOL terms peaked at 49.7 million on May 3, marking a 26% increase over two months. This growth was propelled by a $500 million inflow into Sanctum’s liquid staking solution. By comparison, Ethereum (ETH) saw a 9.5% increase in ETH terms during the same timeframe, whereas the TVL of the BNB Chain experienced a 24% reduction.
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In terms of active addresses interacting with DApps, Solana reported a 29% weekly rise, primarily fueled by the liquid staking application Jito, which saw $312 million in transactions. This was followed by growth in Marinade Finance, which recorded $220 million in transaction volume. Ethereum DApps reported a 20% increase in volumes, while BNB Chain saw a 22% decrease in the same seven-day period, according to DappRadar.
While it is difficult to predict the sustainability of SOL’s price above $150, the bullish reports from major investment banks, heightened activity on the Solana network, and ongoing developments focusing on interoperability and reliability suggest a growing investor interest.
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.
