17 November 2023

Oh, well. Another rally leading into a US SEC deadline. Another reaction to an inevitable delay (Bitcoin spot ETF decision). The push towards total crypto market cap of $1.5 trillion has been stalled – for now.

Bitcoin is down 1% on the weekly while Ethereum is down ~7% and is back below $2,000.

There is one asset in the top 10 that is still impressive on the weekly – Solana (SOL). After a 25% gain this week, SOL seems to have regained the trust of investors after the fallout of FTX.

Today, in our Hot Take, we analyse Solana, its ecosystem and how far SOL can go in the upcoming bull run.

Top-3 stories of the week:

1

2

3

The newsletter is put together by Giottus Crypto Platform. You can read all the previous issues of Cryptogram here.

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WEEKLY MACROS

• Total crypto market cap - $1.39 trillion - DOWN 0.8%

• Bitcoin price - $36,350 - DOWN 1.0%

• The dollar index (DXY) - 104.4 - DOWN 1.2%

• Bitcoin Dominance - 52.1% - DOWN 0.5%

• Crypto Fear and Greed Index - 63 - the market is in greed

THE HOT TAKE

Solana is tracking Ethereum of 2020

Comparisons are often hard and lead to misleading interpretations.

This week, we all grappled with the question from the cricketing world - is Virat Kohli better than Sachin in ODIs? We won’t ever know but they both have entertained different generations of cricket fans with equal measure.

Just as hard as comparing cricketers over different timelines, comparisons in crypto assets can also be tough. Will Ethereum overtake Bitcoin in market cap one day? Will Solana be the next Ethereum?

In crypto, generations can roll over faster than we think. Every 4 years, a new set of traders and investors wish they had invested in the market the previous cycle. Ethereum was trading at $120 in January 2020. Wish you have bought at least 10 of them at that price?

Today, Solana is trading at ~$60 a token, up from sub-$10 at the start of this year.

We analyse the key trends and try to understand what is driving the ecosystem currently and what is ahead.

1. Solana’s user activity is matching Ethereum

User activity is a strong indicator of blockchain health. After all, blockchain’s primary function is to have many users do their transactions on-chain.

According to data to Artemix, Solana hosted 356,300 unique users on November 11, surpassing Ethereum’s 330,000 by 10%. The milestone was driven by a sharp uptick in activity on Solana, with the network hosting only 208,000 active addresses on November 7.

2. Partnerships are Solana’s strong suit

In crypto, some of the partnership announcements are just PR while some have real meaning to its userbase. Solana, given its strong institutional backing, has been attracting big brands to use its blockchain. Some of the recent ones are: 1) Google Cloud; 2) Visa; 3) Shopify; and 4) Dubai (state).

There isn’t a viable off shoot of these as a use case yet – but things are looking bright in terms of evolution and maturity of the blockchain.

3. Potential airdrops in the ecosystem

Incentives-based marketing, specifically airdrops, are generally seen as the Web3 version of user acquisition. Some part of the latest buzz around Solana could be attributed to the potential airdrops of some projects in the ecosystem.

According to Messari, roughly $113 million in potential airdrop liquidity will be released in the next 6 months, aggregated from the five projects. A new influx in capital brings an increase in TVL (total value locked) and can lead to increased trading activity within an ecosystem.

4. Vaneck releases report on Solana with $3,200 bull case

The hype around a token’s short-term performance often leads to bold predictions for the future. Solana seems to be getting such attention too.

A report from VanEck, a multi-billion-dollar institutional asset manager, describes their thesis for Solana’s high performance throughput technical architecture and areas of market share that it may be able to capture relative to other protocols.

Most notably, the report laid out their bear base and bull case for SOL, which included the headline number of a $3,200 bullish case for the asset by the year 2030.

5. Projects are flourishing

Solana ecosystem is doing relatively well, with names like SHDW, MNDE, FLUXB gaining prominence among niche investors. Its key NFT plays – Madlads and SolanaMonkeBusiness – are doing close to 2x trade volumes amongst the recent surge. Solana wallet Phantom also saw more than 100k downloads in the past week.

6. Tech advancements

We focus on two tech advancements that are on the anvil.

Firedancer is a full reimplementation of a Validator for Solana. A scaling solution developed by Jump Crypto, is seen as a long-term solution to the blockchain’s once-frequent outages. It is aimed at increasing speed, reliability, and validator diversity. Its slated mainnet launch is in the first half of 2024.

Jupiter is a swap aggregator, a platform used to gather liquidity for traders seeking the best possible prices with minimal slippage. The team behind the project confirmed a token launch during the recent Solana Breakpoint event. The protocol’s internal tracker reports $1.03 billion in volume over the past week.

Key takeaway

Is it all rosy for Solana currently? Likely not. Due to the low costs of operating the chain, Solana only makes around $1 million in fees per month, while the supply costs are around $30 million per month. The design of the chain makes it hard for Solana to earn money, raising concerns about the sustainability of its price action. Without generating significant cash flows that exceed investments, there may be limitations on creating value.

But, so far, SOL token is doing well. It has key resistances at $67 and then $78 to overcome to rally further. However, a revisit of $40 support zone is likely in upcoming weeks for a healthy bounce.

Plan your investments into Solana with the right approach. Practice cost averaging and when there is a 20+% correction in markets.

You don’t want to be left wondering why you hadn’t invested some capital in Solana in 2023 right?

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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 your own research before investing and seek independent legal/financial advice if you are unsure about the investments.