Over the past month, the cryptocurrency Solana (SOL) has risen in price by more than 38%. Let’s understand what was associated with the impressive growth in the price of altcoin, why it has now begun to fall and what awaits the coin in the future.
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Cryptocurrency Solana Since its creation, Solana was positioned as a “killer of Etherium”. The main argument was the number of transactions per second (TPS), which can reach from 65,000 (achieved in tests) to 710,000 (theoretical value).
Such values can be achieved by a specific Proof-of-History (PoH) algorithm and some other solutions that increase network throughput. In short, we are talking about the blockchain synchronization algorithm and internal clocks that ensure the work of nodes “on schedule” – in conjunction with steaking. Many other projects have been launched on the basis of this blockchain. However, for all the speed and high throughput, Solana had one big problem – very frequent system failures. It wasn’t until 2023 that some progress was made in this area.
On July 20, Solana presented a report on the performance of its network. In the first half of the year, the platform had only one failure, on February 25. At the same time, there were no failures at all in the second quarter. This shows the serious progress the project has made in a year. In 2022, almost a third of January was spent in failures.
The stability index was not the only indicator of improvements in Solana. Growth was demonstrated by the ratio of voting transactions to non-voting transactions. The former occur when a block is confirmed by validators. The latter occur after network user actions, such as NFT releases. Solana itself expects the rate to decrease due to the greater efficiency of the network.
The positive impact was a reduction in the time it took to produce a block. This means that the network works faster, conducting transactions. The sharp jump was on February 25 – that was the day of the crash:
The number of transactions per second was almost unchanged and varied from 3,200 to 4,300. The TPS drawdown was observed only on February 25. At that moment the indicator did not even reach 800 transactions per second. Such figures should not be surprising. In the test conditions, only simple token transfer transactions were taken into account. The data presented in the report is more comprehensive and contains information about complex iterations. Buying an NFT, for example, requires more resources than a simple transfer.
What’s going on with the price of Solana?
Is the good performance of the platform reflected in the value of the cryptocurrency?
Solana Technical Analysis Solana had a very successful stretch from June 10 to July 14. In 34 days, the SOL token grew in value by more than 150%, showing the maximum for a year and a half – $32.27. Not surprisingly, after such a surge, investors and traders decided to lock in profits, and Solana began to correct.
By July 24, the coin lost a little more than 26% of its value. The upcoming meeting of the Federal Reserve (Fed) in the week may have contributed to the decline of Solana. There may be announced a new interest rate hike, which usually has a rather negative impact on cryptocurrencies.
In any case, after the speech of representatives of the U.S. Central Bank can be expected to increase volatility. Withdrawal of money from exchanges by large players (so-called whales) contributes to the decrease. On July 20, 2 million SOL tokens (more than $51 million) were withdrawn from the Binance exchange to an unknown wallet. The next day, however, 409,823 SOL tokens (about $10.3 million) were deposited on the same platform.
However, the general negative trend is evident. The main question that now worries investors is when will Solana’s decline stop? So far, there are no preconditions for this. Perhaps they will appear if the cryptocurrency manages to stay above the support level around $22.3. Resistance is in the range of $25-$27.
While things are quite negative in the short term, there are positive signals in the long term. Even after losing more than a quarter of its value, Solana is still trading above its 50-day moving average (indicated in green):
It is worth adding: the coin is also far from its historical maximum value, which exceeded $260 in November 2021. That is, the current rate is more than ten times lower than the record value. At the same time, Solana is now in the top 10 cryptocurrencies in terms of capitalization, ranking ninth (over $9.55 billion) and significantly overtaking its competitor TRON ($7.25 billion), but losing to Dogecoin ($10.78 billion).
The Solana cryptocurrency (SOL) has significantly improved its performance in recent months as it relates to the stability of the network, providing a boost to the coin’s value in June and July. At the same time, the asset has not yet managed to move into a long-term and rapid growth with the support of bulls, and since the second half of July, a correction of the rate was formed. The coin is far from its record values. The pressure from the U.S. financial regulators may not be in its favor.