Key points:
Despite a decrease in Solana network activity and fees, expectations surrounding spot ETFs continue to attract investor interest in SOL.
Concerns about validator income sustainability and staking inflation exist, yet institutional investments may boost SOL prices.
Solana’s native token, SOL, experienced a 10.5% increase after testing the $191 mark on Friday. However, the token’s price remains 10% lower over the past two weeks, lagging behind competitors like Ether (ETH) and BNB (BNB). Traders are now assessing the likelihood of SOL returning to $250 and examining the reasons for its recent underperformance.
Investor sentiment improved during the weekend after US President Donald Trump indicated he would work to prevent a government shutdown affecting non-essential federal operations. However, Congress has yet to garner the necessary 60 votes to pass a temporary funding bill by Tuesday, risking “unpredictable and immediate economic repercussions,” as reported by Yahoo Finance.
In the meantime, gold hit an unprecedented high of $3,833 on Monday, highlighting ongoing concerns about the US fiscal debt situation. Even if a short-term agreement is reached, the Treasury will still incur over $1 trillion annually in interest payments. This growing rift between government income and expenditures drives savers toward scarce assets, including cryptocurrencies.
While the overall cryptocurrency market recorded gains on Monday, SOL struggled to maintain the $212 threshold. Investor frustration stems from declining activity on the Solana network.
According to Nansen data, transactions on Solana decreased by 10% over the past week, with fees plummeting nearly 50%. In contrast, several competitors showed significant upticks, such as a 56% rise in fees on BNB Chain, while Arbitrum and HyperEVM more than doubled their fee revenue from the previous week.
Growth of perpetual futures on Hyperliquid and Aster impacts SOL sentiment negatively
The swift expansion of synthetic perpetual futures on Hyperliquid, Aster, and edgeX has also negatively affected sentiment towards SOL. Solana previously dominated decentralized exchange volume through platforms like Meteora, Raydium, and Pump, leading many SOL holders to overestimate the network’s competitive advantages in fees and user experience.
Hyperliquid has opted to launch its own chain to cut fees and eliminate validators’ maximal extractable value (MEV). Aster, a project supported by YZi Labs (previously Binance Labs) and integrated with BNB Chain, also intends to create its own layer-1 network.
For SOL advocates, the most significant catalyst for reversing the token’s recent downturn is the anticipated approval of standard exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC). The regulator’s final deadline is October 10, with analysts estimating a 95% or higher probability of approval, sparking hopes for substantial inflows during the early trading months.
Related: Aster considers vesting schedules for token airdrop recipients
SOL’s momentum is also influenced by how investors perceive its native staking yield. Critics caution that Solana’s inflation could pose a significant risk due to the network’s nearly 1,000 validators with considerable setup and operational expenses.
According to X user ‘Boxmining,’ 76% of validator income on the Solana network is derived from newly minted coins rather than MEV or priority fees. This analysis raises concerns regarding the sustainability of the staking reward rate in the future, which may impact demand for a Solana ETF.
Traders should avoid assuming a price drop solely based on diminishing on-chain activity, as inflows from companies accumulating SOL reserves, coupled with the potential approval of a spot ETF, could pave the way for a rally toward $250.
This article is for informational purposes only and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily represent the views of Cointelegraph.
