3 reasons why Solana (SOL) price is rising this week Cryptocurrency scrgruppen

Solana (SOL) price saw a 20% gain between September 28 and October 6, but is the rise a movement in tandem with the price of Bitcoin (BTC) or is it driven by other factors? Before the price breakout, or perhaps recovery, SOL faced a turbulent period after a US court approved the sale of $1.3 billion of SOL from the bankrupt exchange FTX.

Solana Daily Price Index, USD. Source: Trading View

The bankruptcy court took measures to ensure that the liquidation of FTX assets would not become a burden on the cryptocurrency market, and required that the sale be done through an investment advisor in weekly batches according to pre-established rules.

Following the initial impact, which took Solana’s price down to a two-month low of $17.34 on September 11, a certain degree of confidence emerged among the bulls as it re-established $20 support on September 29. This move coincided with a successful upgrade to version 1.16, boosting the SOL token by 16% over the next seven days.

Solana’s rise was also supported by growth in the use of decentralized applications (Dapps) and increasing non-fungible token (NFT) volumes. Solana price is now trying to establish support at $23 and consolidate its position as the fifth largest cryptocurrency (excluding stablecoins) by market cap, surpassing Cardano’s price of $9.22 billion.

Solana DApp and NFT market activity has increased

When analyzing networks focused on Dapp implementation, the number of active users should be a top priority. Therefore, one should start by measuring the addresses associated with smart contracts, which serves as a proxy for the number of users.

Active Solana Dapp addresses, for 7 days. Source: Dab Radar

Note that the increase in activity was consistent across all sectors, including NFT, decentralized finance (DeFi), collectibles, social, and gaming markets. Furthermore, active Solana addresses transacting with Dapps surpassed Ethereum addresses in the same period, which was set at 55,230.

Solana has gained traction in the NFT market due to its cost-effective and scalable solutions, where data is compressed and stored off-chain. This allows for more viable productions in larger quantities, as they require lower seigniorage, enabling creators to reach wider audiences.

NFT sales per blockchain, 7 days. Source: CryptoSlam

Over the past seven days, Solana Network has surpassed Polygon (MATIC) in NFT sales, accumulating $6.8 million in value according to Cryptoslam. In September, the situation reversed, with Solana sales totaling $23.9 million, while the Polygon network generated $31 million in NFT sales.

Upgrading the network improves privacy and relieves pressure on auditors

A likely driver behind Solana’s recent 20% price gain was the network’s upgrade to version 1.16 on September 28, which introduced a “gateway system” to ensure gradual activation of new features on the network. This process helps maintain network stability and prevents problems caused by sudden changes.

Another notable change in this update is Secret Transfers, which uses zero-knowledge proofs to encrypt transaction details, enhancing user privacy. The release also includes improvements in RAM usage for validators, accounts for resizable data, and a mechanism to identify corrupted data.

Overall, this update brings improved efficiency, privacy, and security to the Solana blockchain, marking an important milestone in its evolution.

Intense competition from Ethereum’s Layer 2 solutions

Although Solana competes with other blockchain networks, there is no doubt that Ethereum’s layer 2 solutions have gained more traction in terms of total value locked (TVL) and activity. For example, Arbitrum has $1.73 billion in TVL, and Optimism has another $637 million, both of which significantly outnumber Solana’s $326 million, according to DeFiLlama.

Even as Solana continues to make progress on privacy, scalability, and security, external factors are at play beyond the FTX bankruptcy drama, making breaking the $23 resistance harder than expected.

Ultimately, investors remain largely focused on the Ethereum ecosystem, as it remains the leader in terms of developers and standardized decentralized applications.

This article is for general information purposes and is not intended and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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