The world of cryptocurrency has seen yet another remarkable surge in the price of Solana (SOL), with a staggering 40% increase just this week. This surge has led to the establishment of a new 2023 high at around $58, marking Solana’s best weekly performance since January 2023. The question on everyone’s mind is: what factors have contributed to this significant price jump?
One of the primary reasons for the overall uptrend in cryptocurrency prices is the surge in popularity and excitement around Bitcoin ETFs. As Bitcoin continues its rise towards $38,000, the euphoria surrounding these ETFs has spilled over to other cryptocurrencies, including Solana. This newfound enthusiasm in the cryptocurrency market, coupled with a growing appetite for risk among investors, has played a substantial role in driving up the price of Solana.
Interestingly, Solana’s rise coincides with the daily selling of 250,000-750,000 SOL tokens by FTX bankruptcy estate in the last two weeks. Back in September 2023, the Delaware Bankruptcy Court approved the sale of 55.75 million SOL tokens. Initially, there were concerns about the impact these sales would have on Solana’s price. However, given that some tokens were either vested or locked and there was a weekly sale limit of $100 million, the limited impact has transformed initial fears into investor enthusiasm.
To gauge institutional flows in the SOL market, Solana-focused funds serve as essential indicators. According to CoinShares, these funds recorded inflows worth $10.80 million in the week ending November 3. This further underscores the growing confidence among institutional investors in Solana’s potential and its ability to generate substantial returns.
Solana’s futures open interest reached an impressive level of around $772 million on November 11, the highest it has been since November 2021 when SOL’s price hit a record high of $260. Such high open interest levels signify heightened interest and liquidity in the market. Additionally, as open interest rose, funding rates also increased. A positive funding rate indicates that longs (buyers) are dominant, with shorts (sellers) paying the fee. This week, SOL’s funding rate rose to 0.035% per eight hours, implying a 0.735% weekly cost for leverage longs. These developments point to a strong bullish sentiment prevalent in the market, with derivatives traders anticipating a continued rally in SOL’s price.
Solana’s gains this week are seen as part of a bullish breakout move. Two weeks ago, the price broke above the horizontal trendline resistance of its ascending triangle channel. This breakout suggests that the upside target for SOL’s price before the end of the year could be around $90, representing a 50% increase from current levels. However, it is crucial to recognize the bearish perspective as well. The weekly relative strength indicator (RSI) for SOL is now at its most overbought level since September 2021. This indicates a higher risk of a correction, potentially towards the triangle’s upper trendline near $30.
Solana’s surge in price and performance has caught the attention of cryptocurrency enthusiasts and investors alike. With Bitcoin ETF euphoria driving the overall cryptocurrency market and Solana’s unique position as a top performer over the past 30 days, it is clear that this cryptocurrency is a force to be reckoned with. However, as with any investment, it is essential to remain cautious and recognize the risks that come with such rapid price increases. As Solana continues to make waves in the cryptocurrency market, its journey towards new heights will undoubtedly be closely watched by investors around the world.