Solana Price Reaches All-Time High – What Does the Strong Rally Mean for SOL?

On June 14, Solana (SOL) experienced a surge in its price, reaching a YTD peak, following the partial success of Ripple’s legal battle against the US Securities and Exchange Commission, which aimed to contest the status of XRP (XRP) as a security.

The token rose by 48.09%, peaking at $32.40, before it retraced back below the $30.00 mark. This outcome nullified the losses incurred in June 2023, when the SEC declared SOL a security, and it also restored the values seen before the FTX crash in November 2022.

Nevertheless, considering the usage and market charts of the network, it is unlikely that a long-term bullish trend will follow, with the $30 level proving to be a formidable resistance.

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Solana ecosystem growth stalls

Token Terminal data shows that total fees paid on Solana are still below Q3 2022 levels, prior to the FTX collapse, suggesting that the network’s activity has yet to fully recover.

The Solana ecosystem had close ties to Sam Bankman-Fried, the founder of the FTX exchange and Alameda Research-backed projects, and consequently, was hit hard by the FTX collapse.

Active user data for Solana reflects this, with active addresses trending near yearly low levels.

The project has yet to find a product market fit in decentralized finance (DeFi) despite early optimism. Total deposits on Solana, representing its DeFi liquidity, have dropped 97% from its peak of over $10 billion in November 2021.

On the other hand, the NFT ecosystem on Solana has been thriving, maintaining the third position in monthly NFT trading volume since June 15.

However, trading volumes saw a small spike in June, but have since fallen back to yearly low levels in July, suggesting that not much has changed since FTX’s collapse.

In the gaming sector, the most popular games on Solana — Genopets, Tap Fantasy and Aurory — have fewer than 10,000 monthly users, according to DappRadar. This is far less than competing networks such as Near, Polygon, Ronin Network and Arbitrum, which have more than double the monthly players for specific games.

The lack of growth in the gaming sector indicates that the fundamentals have remained unchanged over the past few weeks.

Nevertheless, the Solana team has been rolling out upgrades to improve the speed and scalability of the blockchain, with an ambitious roadmap ahead. The Firedancer upgrade by Web3 infrastructure development and investment firm Jump Crypto will increase Solana’s speed to over 1 million transactions per second by introducing a next-generation validator client, and is expected to arrive sometime in late 2023 according to the Jump Crypto website.

The performance of the blockchain after the Firedancer upgrade will be a key factor in determining its success. Its use in high-frequency applications like trading or gaming and its ability to mitigate network downtime risks will be especially important.

Until then, however, the project’s fundamentals do not support the arrival of a new bullish trend.

SOL price analysis

The SOL/USD pair recently moved above the resistance from the long-term descending trendline since the 2021 peak, which is technically an indication of the end of the long-term bearish trend.

However, buyers are facing a significant obstacle at $30.00, which has served as a long-term support and resistance level. A confirmation of a long-term bullish trend will be seen only after buyers manage to establish support above this level.

Given the rapid rise after the Ripple news on June 13, there is a possibility that SOL will retest the trendline around $18.00 before making a substantial move higher. The yearly lows and the long-term horizontal level at $12.76 will provide support to buyers in case of a downside.

Nevertheless, the weekly Relative Strength Indicator (RSI), a momentum indicator, suggests that there is more room for upside.

The SOL/BTC pair is facing resistance from the yearly peak level of around 0.00114 Bitcoin (BTC). The 50-day weekly moving average at 0.00104 BTC level also appears to be functioning as a crucial resistance, as its price peaked at this point on June 14.

The perpetual swap market indicates a possible pullback due to the considerable increase in long interest, which raises the possibility of a contrarian trade to the downside.

The funding rate for SOL perpetual swap contracts, which reflects the sentiment of perpetual traders toward an asset, has surged to a two-month high. This shows that many traders opened long positions following the positive breakout on June 14, driven by fear of missing out (FOMO) sentiments.

The accumulation of long orders has the potential to trigger a long squeeze in the opposite direction, as more experienced traders target the stop losses of long players.

The favorable court ruling of Ripple in its case against the SEC revived hopes around SOL’s position as a security in the United States. The financial regulator is also expected to meet the same fate in its fresh lawsuits against Coinbase and Binance.

However, the network’s growth and technical levels suggest that many hurdles exist and a medium to long-term bullish price is unlikely.

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