SOL Surges, Faces Resistance as Market Analyzes Sustainability
Solana's native token, SOL, experienced a notable 16% surge between July 25 and July 29, reaching a four-month high of $193.92. However, the rally hit a strong resistance at the $190 level, resulting in an 8% correction down to its current price of $179. Despite this pullback, SOL still posted a 23.5% gain for the month of July. Yet, some traders are concerned that this correction might signal the beginning of a longer downtrend.
Much of the enthusiasm around SOL can be attributed to speculation about an exchange-traded fund (ETF) approval. After Ether (ETH) ETFs were greenlit for trading in the U.S. on July 22, investors have pinned hopes on a similar approval for SOL. The final decision from the U.S. Securities and Exchange Commission (SEC) is expected by March 2025.
At the Bitcoin Conference on July 25 in Nashville, BlackRock’s head of digital assets expressed that their clients showed limited interest beyond Bitcoin and Ether. However, Franklin Templeton offered a more optimistic view, citing "major adoption" and the successful resolution of "technological growing pains" as reasons for a positive outlook on a SOL ETF. While the outcome of the SEC’s decision remains uncertain, the anticipation surrounding it has undoubtedly contributed to SOL's recent gains.
Solana's network has also seen a boost from memecoin activity, particularly through platforms like Pump.fun, which facilitate the launch of tradable tokens using a fair-launch methodology. This platform has generated significant volumes and revenue, with fees totaling $25.8 million over the past 30 days, surpassing Bitcoin's $24.4 million in protocol fees paid to miners. Additionally, the number of unique addresses engaging with Pump.fun reached 219,070 in the past week, outpacing BNB Chain’s PancakeSwap and Ethereum’s Uniswap.
Despite this activity, some investors are wary of Solana's heavy reliance on memecoins, such as Dogwifhat (WIF), Bonk (BONK), Book of Meme (BOME), and Cat in a Dog’s World (MEW). Critics argue that this focus could be risky, but supporters point to Solana's SPL tokens like Jupiter (JUP), Lido DAO (LDO), Helium (HNT), and Raydium (RAY) as evidence of the network's robust infrastructure and validator technology.
Concerns about Solana’s total value locked (TVL) and validator power have also emerged. The network’s TVL has stagnated near 30.5 million SOL over the past two weeks, after peaking at 32.1 million SOL on July 5, the highest level since October 2022. This stagnation mirrors similar trends on competing platforms like Ethereum and BNB Chain.
Another significant issue is the maximal extractable value (MEV) problem, where validators can manipulate transaction ordering for profit. This issue is particularly pronounced on Solana due to its lack of a built-in mempool, forcing users to rely on out-of-protocol infrastructure.
