Key takeaways:
Activity on the Solana network and associated fees have decreased, but expectations for spot ETFs continue to attract investor interest in SOL.
Risks include sustainability of validator income and staking inflation, yet institutional investments might boost SOL’s value.
Solana’s native token, SOL, jumped 10.5% after testing the $191 mark on Friday. Despite this rebound, the token’s price is still 10% lower compared to two weeks ago, lagging behind competitors Ether and BNB. Traders are currently evaluating SOL’s potential to rise back to $250 and trying to analyze the reasons behind its recent underperformance.
Investor sentiment improved over the weekend after US President Donald Trump indicated his intent to prevent a government shutdown affecting non-essential federal agencies. However, Congress has yet to secure the 60 votes needed to pass a temporary funding bill by Tuesday, which could lead to “unpredictable and immediate economic fallout,” according to Yahoo Finance.
Meanwhile, gold hit a record high of $3,833 on Monday, reflecting ongoing anxiety regarding the US fiscal debt situation. Even if lawmakers reach a short-term agreement, the Treasury still faces over $1 trillion in annual interest payments. This growing disparity between government income and spending is encouraging savers to turn to limited assets, such as cryptocurrencies.
While the wider cryptocurrency market saw gains on Monday, SOL struggled to maintain the $212 level. Part of the frustration among investors is attributed to declining activity on the Solana network.
In the last week, transactions on Solana decreased by 10%, while fees nearly halved, as per Nansen data. In contrast, several rivals saw significant increases, including a 56% rise in fees on BNB Chain, while Arbitrum and HyperEVM more than doubled their fee revenue from the previous week.
Perpetual futures surge on Hyperliquid, Aster, while edgeX dampens SOL sentiment
The swift growth of synthetic perpetual futures on Hyperliquid, Aster, and edgeX has also impacted sentiment towards SOL. Solana was previously a leader in decentralized exchange activity through platforms like Meteora, Raydium, and Pump, leading many SOL holders to overestimate the network’s competitive advantages concerning fees and user experience.
Hyperliquid has opted to launch its own chain to lower fees and mitigate validators’ maximal extractable value (MEV). Aster, a project supported by YZi Labs (formerly Binance Labs) and currently linked with BNB Chain, also intends to introduce its own layer-1 network.
For SOL proponents, the most promising catalyst for reversing the token’s poor performance is the expected approval of standard exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC). The regulator’s final deadline is on Oct. 10, and analysts see a 95% or higher chance of approval, sparking hopes for substantial inflows in the initial months of trading.
Related: Aster considers vesting schedules for token airdrop recipients
SOL’s trajectory also depends on how investors perceive its native staking yield. Critics point out that Solana’s inflation could pose a challenge, considering the network’s nearly 1,000 validators, whose significant setup and operational costs could impact sustainability.
As per X user ‘Boxmining,’ 76% of validator income in the Solana network is derived from newly issued coins rather than MEV or priority fees. This analysis raises concerns about the long-term viability of the staking reward rate, which may affect demand for a Solana ETF.
Traders should not predict a price drop solely based on diminishing on-chain activity, as inflows from companies accumulating SOL reserves and the potential approval of a spot ETF could create a scenario for SOL to rally towards $250.
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.
