Solana is performing well in 2023 with a 227% increase to $22.9. However, investors should exercise caution as the rise is largely driven by technical factors.
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Image Source: Cryptocurrency Exchange StormGain
Solana started 2022 with a drop in capitalization,since already in January it faced a traditional series of failures, some of which ended in a complete stop for the network. But users and developers have come to terms with this feature, highlighting the low transaction costs and the speed of operations.
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Calendar of errors in the network. Image source: status.solana.com
The real blow came from FTX, collapsewhich revealed close business ties between the crypto exchange and Solana. A number of experts believe that SOL was one of several coins that were artificially pumped (inflated in price) by an affiliated company, Alameda Research.
Just a few days after the crypto exchange fiascoSOL "lost" three times, and there were so many people willing to sell that the funding rate on perpetual futures contracts fell below -5% on individual crypto exchanges.
Image Source: coinglass.com
At the end of December, Vitalik Buterin spoke withthe support of the developers, and the subsequent rise of the cryptocurrency market played a cruel joke on the bears: a slight increase in the price led to the collapse of protective orders, which further pushed the coin to growth. As a result, sellers lost $58 million in the first two weeks of the year.
At the same time, FTX and Alameda store a total of 11% ofthe total supply of SOL or 58 million coins worth $1.3 billion. At the end of the litigation, the liquidation commission will start selling them to cover the losses of investors. Even if implemented smoothly over the next five years, there remains a significant risk of pressure on the price.
Another long-term factor is the falltrust in the network. The FTX controversy led to the departure of two of Solana's biggest NFT projects: DeGods and y00ts. If other developers follow, the network will face oblivion. Over the past six months, the number of active developers and daily users has already halved.
Image source: tokenterminal.com
SOL growth in 2023 driven by strongoversold, in the stock market a similar situation with an oversupply is called a short squeeze. At the same time, Solana's long-term prospects remain dim for objective reasons.
Analytical group StormGain
(platform for trading, exchanging and storing cryptocurrency)
