6 October 2023

We are in UPtober! After weathering the September seasonal trend and emerging positive, Bitcoin and crypto look to showcase further gains in October, a green month for crypto in general. Is BTC going to get a sustained run this month and cross $30,000?

In our Hot Take today, we cover Solana, its ecosystem and why the asset is showcasing relative strength against Ethereum. Strap your seatbelts.

Top-3 stories of the week:

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The newsletter is put together by Giottus Crypto Platform and The News Minute’s Brand Studio. You can read all the previous issues of Cryptogram here.

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WEEKLY MACROS

• Total crypto market cap - $1.08 trillion - UP 1%

• Bitcoin price - $27,521 - UP 2.2%

• The dollar index (DXY) - 106.41 - UP 0.3%

• Bitcoin Dominance - 50.63% - UP 1.3%

• Crypto Fear and Greed Index - 50 - the market is in neutral state

ICO CALENDAR

• 10^th Oct - VinuChain (VC)

• 12^th Oct - Klubcoin (KLUB)

THE HOT TAKE

Solana surges on strong institutional backing

Solana, a layer 1 touted as an alternative to Ethereum, enjoyed a phenomenal run in 2021 before getting hit by wider market sentiment as well as the collapse of FTX. The asset, which once traded at $260, went below $10 early this year.

It has since recovered and is now trading around $23. That’s not all – its ecosystem is thriving in the bear market. Today, we cover some recent trends related to Solana.

1) Breakout against Ethereum: Technical Analysis

After falling in the last quarter against Ethereum, Solana has done a bullish breakout from a falling wedge.

The upward shift has propelled the RSI index to the overbought territory and is currently sitting at 75. If the pair manages to successfully surpass the 0.015 mark, this could lead to further increase towards the resistance levels of 0.017.

SOL being the higher beta asset over ETH, should do well in this pair from a risk-reward perspective. This move is thus significant as investors will now consider SOL to park some of their portfolio which they earlier avoided.

2) Solana has piqued institutional interest

According to CoinShares’ latest crypto fund report, Solana is the most-preferred altcoin investment by Institutional investors. Solana has had a bright 2023, with 27 weeks’ worth of inflows versus merely four weeks of selloffs. With an inflow of $5.1 million, Solana appears to be the only asset (excluding Bitcoin) to have a positive flow. The asset has garnered $31 million in net flows while Ethereum has registered a negative $114 million in net flow.

3) Growing developer community and ecosystem

In essence, more developer activity leads to more products which, in turn, equals more users which ultimately leads to long-term growth. The developer community has remained resilient and their conviction in Solana playing a large role in the growing Layer 1. The protocol has raised over $600 million in funding over the past two years and has launched some of the best hacker houses – such as Grizzlython, and Solana Hackerhouse 2023. These hacker houses do well in spreading the brand name of Solana, and onboarding future developers for the chain.

Solana ecosystem has always been busier compared to their peers. We managed to put together a list of projects that looks promising in the Solana ecosystem.

• Jup.ag - Jupiter is the key liquidity aggregator for Solana, offering the widest range of tokens and best route discovery between any token pair

• Orca.So - An advanced protocol built around concentrated liquidity automated market maker on Solana

• Marinade.finance - Stake optimization platform that monitors all Solana validators and automatically delegates to best-performing ones

• Raydium.io - AMM which leverages a central limit order book to enable lightning-fast trades, shared liquidity and new features for earning yield

• HDOKI.io - An entertainment ecosystem with crypto-backed rewards

4)  Solana’s share of NFT market is growing

While we note that NFTs as an asset class has had great declines this year, Solana currently ranges between 5-20% of daily NFT volume, and is the leading contender after Ethereum and Mythos for being the blockchain for NFTs. Typically, NFT traders are well-known to bring in huge amount of retail interest, and we believe that SOL can become a secondary NFT chain.

Some of the notable collections rise from Solana includes Madlads, Solana Monkeys, and many more. Bubblegum, the Solana-based NFT compression tool, is enjoying a surge in popularity. Users are now minting 3 million NFTs via the tool each week, with both collectors and issuers saving fees by leveraging Bubblegum.

5) Tread with caution: Liquidations of FTX assets and recession are major negative drivers

The impending liquidation of FTX estate contains roughly 58.8 million SOL tokens worth $1.37 billion, as of yesterday’s price. However, the estate has somewhere between 17-22 million SOL that is unlocked and can be sold at any time. As the court has permitted a maximum of $50 million in digital asset sales during the first week, followed by $100 million per week, we believe the drawdowns will be in the 15-30% range and SOL should bounce back, if the market is able to absorb the selling pressure. In simpler terms, there may not be a fire sale of any kind that will lead to a volatility event.

A US recession risk, however, can be bigger driver of volatility in the space. We will continue to monitor how that plays out in the next two quarters.

Key takeaway

If big institutions are in it, there is merit to be a part of it. Solana is one such project. When the bull market resumes, we expect Solana to outdo Ethereum and Bitcoin in the medium term despite risks outlined above. Liquid staking is set to take off, given recent developments and launches in Solana such as Marinade and Lido. Solana has done well in brand partnerships as well this year – Visa introduced settlement of USDC in Solana while Shopify integrated Solana Pay as a payment method.

However, the risks involved with the project are generally higher compared to Ethereum – Solana has done well to divert attention from technical issues it had in the chain earlier to have an ecosystem that is backing it with full strength. A small portion of your crypto portfolio in Solana seems to be worth the risk post the Bitcoin halving next year.

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If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

Disclaimer: Crypto-asset or VDA investments are subject to market risks such as volatility and have no guaranteed returns. Please do our own research before investing and seek independent legal/financial advice if you are unsure about the investments