Key takeaways:
SOL faces challenges in maintaining $200 as onchain activity declines and leveraged demand remains low.
An approval for a spot ETF and institutional interest could boost SOL, but current fundamentals indicate limited rally potential.
Solana’s native token (SOL) has consistently struggled to stay above $200 over the last six weeks, prompting traders to ponder what’s restraining further growth. This concern is amplified by competitors Ether (ETH) and BNB (BNB) reaching new all-time highs recently.
The potential approval of a Solana spot exchange-traded fund (ETF) in the United States, coupled with companies indicating intentions to incorporate SOL into their corporate reserves, could elevate the token past $250. However, three key conditions need to be fulfilled for a sustainable increase to occur.
Sluggish onchain and futures data makes investors cautious
To restore confidence among SOL buyers, onchain activity on Solana must improve. Network fees dropped 17% compared to the previous week, and transactions fell by 10%. Meanwhile, fees on BNB Chain increased by 6%, with transaction levels remaining steady. Ethereum’s layer-2 activity also experienced growth, with Base transactions rising by 14% and Arbitrum by 20%.
In comparative terms, Solana’s fee levels are significant given the network’s $12.5 billion in total value locked (TVL), against Ethereum’s nearly $100 billion. Nonetheless, Solana’s chain revenue has plummeted 91% from its January peak, a decline that coincided with the debut of the Official Trump (TRUMP) token and a broader memecoin craze.
The absence of demand for bullish leverage on SOL futures further contributes to cautious investor sentiment.
Under neutral conditions, perpetual futures typically exhibit an annualized premium of 8% to 14%, reflecting capital costs and counterparty risk. The current 10% rate suggests balanced demand, which isn’t outright negative, but mildly concerning since SOL’s price has already surged 39% over the past two months.
Binance’s top-trader long-to-short ratio has sharply shifted toward bearish sentiment. This indicator offers a broader view of sentiment as it includes futures, margin, and spot markets.
Demand for bullish SOL exposure on Binance reached a monthly peak last Saturday but has since decreased significantly. Data from derivatives indicate that whales and market makers aren’t aggressively bearish but remain cautious about SOL decisively surpassing $200.
Institutional backing and SEC actions remain key catalysts
SOL’s price showed minimal reaction to reports that Galaxy Digital, Multicoin Capital, and Jump Crypto are aiming to raise $1 billion for a Solana-focused digital asset treasury company. Bloomberg noted that the Solana Foundation supports the initiative, yet this news hasn’t generated momentum.
Related: Solana devs billed $5K for single query via Google Cloud’s BigQuery
The final barrier for SOL’s journey toward $250 hinges on the impending decision from the US Securities and Exchange Commission (SEC) regarding several Solana spot ETF applications. Bloomberg analyst Eric Balchunas estimates approval odds over 90%, with the SEC’s final deadline set for mid-October.
While SOL might still surge above $200 ahead of these catalysts, the chances of a sustainable rally appear low due to weaker onchain activity, limited demand for bullish leverage, and ongoing uncertainty regarding the ETF outcome.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
