The price of Solana SOL rose 20% between September 28 and October 6, but was this rise moving in tandem with Bitcoin or was it driven by something else? Prior to the price breakout (or perhaps the price recovery), Solana faced a turbulent period after a US court approved the sale of $1.3 billion of SOL from bankrupt exchange FTX.

Solana Daily Price Index

The bankruptcy court has taken steps to ensure that the liquidation of FTX’s assets does not become a burden on cryptocurrency markets, requiring that the sale be conducted in weekly tranches through investment advisors according to pre-established rules.

The initial impact caused the price of SOL to drop to a two-month low of $17.34 on September 11, before bulls gained some confidence after reestablishing support at $20 on September 29. This move coincided with a successful upgrade to version 1.16, boosting SOL by 16% over the next seven days.

The growth in the use of decentralized applications (DApps) and the increase in the number of non-fungible tokens (NFTs) on Solana also supported the rise of SOL. The price of SOL is currently trying to establish support at $23 and consolidate its position as the fifth largest cryptocurrency by market capitalization (excluding stablecoins), surpassing ADA at $9.22 billion.

Solana’s DApp and NFT Market Activity Surges

When analyzing a network focused on DApp execution, the number of active users should be the top priority. Therefore, we should first quantify the addresses involved in smart contracts, which can serve as a proxy for the number of users.

Solana DApp Active Addresses

Note that the growth in activity was consistent across all sectors, including NFT marketplaces, decentralized finance, collectibles, social, and gaming. Additionally, Solana’s DApp-related active addresses exceeded Ethereum’s active addresses during the same period, capped at 55,230.

Solana has gained traction in the NFT market for its cost-effective and scalable solution where data is compressed and stored off-chain. This makes large-scale production more feasible as they require lower minting fees, enabling creators to reach a wider audience.

NFT sales per blockchain

According to CryptoSlam, the Solana network has surpassed Polygon in NFT sales over the past seven days, with a cumulative value of $6.8 million. In September, the situation reversed, with Solana totaling $23.9 million while the Polygon network achieved $31 million in NFT sales.

Network upgrades to enhance privacy and reduce pressure on validators

One potential driver of SOL’s recent 20% price increase was the September 28 network upgrade to version 1.16, which introduced a “gate system” to ensure the gradual activation of new features on the network. This process helps maintain network stability and prevent issues caused by sudden changes.

Another notable change in this update is “confidential transfers”, which use zero-knowledge proofs to encrypt transaction details and enhance user privacy. This version also improves RAM usage for validators, adjustable data account sizes, and a mechanism for identifying corrupted data.

Overall, the update brings greater efficiency, privacy, and security to the Solana blockchain, marking a major milestone in its development.

Fierce competition from Ethereum Layer-2 solutions

Despite Solana’s competition with other blockchain networks, there is no doubt that Ethereum Layer 2 solutions have gained more traction in terms of total value locked (TVL) and activity. For example, according to DefiLlama, Arbitrum holds $1.73 billion in TVL and Optimism holds another $637 million, both of which are far higher than Solana’s $326 million.

While Solana continues to make progress in privacy, scalability, and security, external factors beyond the FTX bankruptcy are at play, making the $23 resistance level more difficult to break than expected.

Ultimately, investors are still primarily focused on the Ethereum ecosystem, as it remains the leader in terms of developers and integrated decentralized applications.

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【Disclaimer】The market is risky, so be cautious when investing. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Investing based on this information is at your own risk.