Solana (SOL) has garnered significant attention in the cryptocurrency market due to its impressive price rally. However, many investors and analysts are now questioning whether the rally is sustainable and if the fundamentals support the current price.
Despite SOL’s remarkable surge from below $22 to a high of $210 in just six months, the cryptocurrency is still 50% below its all-time high of $260 in November 2021. In the past four weeks, SOL has entered a consolidation pattern, suggesting a period of cooling off.
To assess the viability of SOL’s price rally, it is important to examine its underlying fundamentals. Jamie Coutts, Chief Crypto Analyst at Real Vision, acknowledges that SOL’s performance has tapered off in the last month but points out that it remains the best-performing network in the past 12-18 months. Coutts argues that the price adjustment aligns with fundamental indicators that indicate a stabilizing rather than diminishing value proposition for SOL.
One strong fundamental indicator for Solana is its significant increase in Daily Active Users (DAUs), which have risen by over 400% in the last nine months. While SOL has not reached its peak DAUs from 2021, the nature of engagement on the platform has evolved. The ecosystem has matured, and engagement is now more diverse and integrated with real-world applications, including artificial intelligence, decentralized finance, consumer applications, memecoins, and NFTs.
Solana’s market capitalization has also hit new highs this cycle, despite a retracement from its peak price in 2021. This suggests a broadening base of investment and valuation recalibration. The Network Value to User (NVU) ratio further supports SOL’s growth story, indicating a balanced growth-to-value dynamic compared to networks where speculative value often outpaces user growth.
Another standout metric for Solana is its fee revenue, which has increased sixfold in a nine-month period. Daily fees now average $1.8 million, a fortyfold increase. This growth is largely due to the network’s increasing utilization across various applications.
Compared to Ethereum, Solana may have fewer total decentralized applications (dApps), but its economic indicators are robust. With a high monetization capability per application, Solana’s dApp cash flow intensity is second only to Ethereum. Additionally, Solana leads all networks with a staggering real fee growth rate of 3,259.7%, highlighting its intense and growing usage.
As Solana continues to expand and mature its ecosystem, the fundamental analysis suggests a network that boasts strong health, economic vigor, and promising growth metrics. Despite market volatility, Solana remains a leading player in the crypto landscape, supported by strong fundamentals and poised for future growth.
In conclusion, while questions about the sustainability of SOL’s price rally arise, the underlying fundamentals of the Solana network remain strong and supportive of its current price levels.