Key takeaways:
Solana is struggling to maintain the $200 mark as on-chain activity declines and leveraged demand stays low.
An approved spot ETF and greater institutional support could boost SOL, but current fundamentals indicate limited potential for a rally.
Solana’s native token (SOL) has consistently struggled to maintain levels above $200 for the past six weeks, prompting traders to analyze the factors hindering upward movement. This concern deepens as competitors Ethereum (ETH) and Binance Coin (BNB) recently achieved new all-time highs.
The possible approval of a Solana spot exchange-traded fund (ETF) in the U.S., along with indications from companies to include SOL in their corporate reserve strategies, could elevate the token above $250. However, three conditions need to be satisfied for a sustainable rally to commence.
Weak on-chain and futures data makes investors wary
For SOL buyers to regain trust, on-chain activity on Solana must improve. Network fees declined by 17% compared to the previous week, while transaction numbers fell by 10%. Conversely, BNB Chain saw fees rise by 6%, with transaction levels remaining stable. Ethereum’s layer-2 activity also experienced growth, with Base transactions increasing by 14% and Arbitrum by 20%.
In relative terms, Solana’s fee levels are significant considering the network’s $12.5 billion in total value locked (TVL), against Ethereum’s nearly $100 billion. Nevertheless, Solana’s chain revenue has plummeted by 91% from January’s peak, a decrease that corresponded with the launch of the Official Trump (TRUMP) token and the broader memecoin trend.
The lack of demand for bullish leverage on SOL futures adds to the cautious sentiment.
In typical conditions, perpetual futures show an annualized premium ranging between 8% and 14%, reflecting costs of capital and counterparty risk. The current 10% rate suggests balanced demand, which isn’t negative but raises mild concerns given that SOL’s price has already increased by 39% over the past two months.
Binance’s long-to-short ratio among top traders has shifted sharply toward bearish positioning. This indicator reflects overall sentiment since it encompasses futures, margin, and spot markets.
Demand for bullish SOL exposure on Binance peaked last Saturday but has since significantly declined. According to derivatives data, whales and market makers are not aggressively bearish, yet they remain cautious about SOL decisively surpassing $200.
Institutional support and SEC actions are crucial catalysts
SOL’s price showed minimal response to reports that Galaxy Digital, Multicoin Capital, and Jump Crypto are attempting to raise $1 billion for a Solana-centered digital asset treasury company. Bloomberg noted that the Solana Foundation supports this initiative, yet the news failed to catalyze momentum.
Related: Solana developers charged $5K for a single query using Google Cloud’s BigQuery
The final hurdle for SOL’s journey towards $250 is the impending decision from the U.S. Securities and Exchange Commission (SEC) regarding several Solana spot ETF applications. Bloomberg analyst Eric Balchunas estimates approval odds to be above 90%, though the SEC’s final deadline is set for mid-October.
While SOL could still rise above $200 ahead of these catalysts, the chances of establishing a sustainable rally appear low due to weaker on-chain activity, limited demand for bullish leverage, and ongoing uncertainty about 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.
