3 reasons why the price of Solana (SOL) could keep rising in 2022

Solana (SOL) has become one of the main competitors in the smart contracts industry and last year the Total Locked Value (TVL) of the network increased by USD 660 million and is being distributed to more than 40 decentralized applications to create an all reach a high of over $ 11 billion.

Despite this growth, investors have reason to wonder whether the current market capitalization of $ 56 billion is justified and compares to competing networks like Binance Smarthain (BNB), Avalanche (AVAX) and Polygon (MATIC).

Avalanche, Solana, Binance Coin and Polygon, price in USD. Source: TradingView

If you look at the price development over the last six months, you can see an obvious decoupling of Terra (LUNA), Solana and Avalanche compared to other competitors of the smart contract platform.

There is a strong institutional appetite for the Solana ecosystem

3 reasons why the price of Solana (SOL) could keep rising in 2022
3 reasons why the price of Solana (SOL) could keep rising in 2022

Solana’s market cap is more than double that of Avalanche and Terra, which each have a market cap of $ 26 billion. Solana’s latest news search on Cointelegraph delivers a wide variety of institutional investments, from Solana Labs’ private token sale of $ 314 million in June to a September fundraiser of $ 18 million in September.

There is strong evidence of a growing ecosystem, as measured by investor appetites. However, to understand the success of Solana’s scalability solution, we need to evaluate its usage metrics.

A look at the number of active addresses in Solana DApps is a good place to start.

The most active dApps from Solana, Ethereum, Avalanche and Polygon during the 7 days. Source: DappRadar

Ethereum’s leading DApp by active addresses is Uniswap with 188,200. So Raydium’s 97,600 weekly users are pretty impressive considering it was only released 10 months ago.. Meanwhile, Uniswap was already valued at more than $ 4.3 billion in February 2021.

As for Solana’s NFT market, Magic Eden, its 58,400 weekly active addresses also make up more than half of Ethereum’s OpenSea, the absolute leader in the industry in terms of volume and user activity.

Avalanche user activity is heavily focused on the decentralized finance app Trader Joe, but its $ 715 million weekly volume pales in comparison to Uniswap’s $ 22.1 billion or $ 12.5 billion Raydium dollars. The same goes for Polygon, which has a $ 573 million deal on its QuickSwap DEX.

Solana has the third largest futures market

Solana currently has the third largest share of open futures, which is the most relevant metric in derivative contracts. This indicator aggregates the total number of contracts held by market participants regardless of recent business activity.

Solana futures add open interest. Source: CoinGlass

Despite the sharp decline since the high on November 8th to USD 1.9 billion, Solana ranks the third largest derivatives market in terms of size with the current open interest in futures of USD 860 million. For example, Binance Coin (BNB) futures are worth $ 520 million, followed by Terra (LUNA) at $ 430 million.

Solana leads the TVL, user and derivatives markets

Without doubt, There’s an impressive amount of activity emanating from Solana’s derivatives markets and on-chain data. The network’s TVL has grown 15x in the past six months, and Solana’s DApps users are nearly half of the users on the Ethereum network.

Solana appears to be quickly bridging the gap on three key metrics: TVL, active users, and derivatives markets. Competitors like Terra, Avalanche, and Polygon seem far behind, which may justify the market cap premium.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and every commercial move involves risk. You need to do your own research when making a decision.

Similar Posts