Why is Solana (SOL) price up this week?

Solana’s native token, SOL (SOL), gained 5.5% on Dec. 13, reclaiming the $72 support level. Over the past four days, it experienced a 16.7% correction, dropping from a high of $77.80 on Dec. 9 to a low of $63.75. The question is whether the factors driving this recovery will continue to support recent gains.

Fed announcement and regulation talk fuel Solana’s rally

The rally in SOL was fueled by three factors, in addition to the U.S. Federal Reserve’s announcement on Dec. 13 of three interest rate cuts throughout 2024. Reduced returns on fixed-income investments are typically seen as bullish for risk-on assets like cryptocurrencies.

SOL token performance in USD, 12-hour chart. Source: TradingView

During a Dec. 12 interview on CNBC, Commodities Futures Trading Commission (CFTC) Chair Rostin Behnam mentioned that the “turf war” among various regulatory agencies is hindering the establishment of clear guidelines for the sector. Behnam believes most tokens are commodities under existing laws and expects the crypto market to persist.

This view contradicts remarks from U.S. Securities and Exchange Commission Chair Gary Gensler, who considers most tokens to be securities. The SEC had previously classified SOL as a security during its lawsuit against the Kraken exchange in November 2023, despite listing multiple altcoins in the same complaint, including ADA (ADA), MATIC (MATIC), and ATOM (ATOM).

Coinbase listings of Solana SPL tokens and airdrop rumors

Solana recently saw increased demand for its SPL tokens due to integrations with the Coinbase and Binance exchanges. For example, Coinbase announced support for Solana’s SPL tokens, starting with Jito’s (JITO) listing on Dec. 7. The launch was highly successful, with 67 million tokens traded in the first five days — impressive considering the token’s circulating supply of 115 million. Additionally, Coinbase announced the listing of another SPL token, BONK, debuting on Dec. 14.

The successful airdrop of Jito’s liquid staking protocol, which yielded over $14,300 for each participant based on JITO’s current price of $2.90, drove substantial demand for SOL’s token, as traders need to interact with decentralized ecosystem applications to qualify for future airdrops.

Solana’s DeFi and NFT markets show decent growth

Recent price gains have been accompanied by Solana network data showing a 12% increase in seven-day transactions compared with a 1% decline in Ethereum and a 4% gain in BBN Chain in the same period.

Top blockchains by DApp volumes, past 7 days, USD. Source: DappRadar

Similarly, Solana’s decentralized application (DApp) volume surged by 83% in the past seven days, compared with a 19% increase in Ethereum and a 44% increase in BNB Chain. Notable highlights in Solana include the nonfungible token (NFT) marketplace Rarible, which boasts 510,940 active addresses, and the cross-chain decentralized exchange (DEX) Saber, responsible for $113 million in trading volume.

Related: BONK, PEPE and SHIB are a menace to crypto

The total value locked (TVL) in the Solana network has reached its highest level since November 2022, prior to the collapse of the FTX exchange. The current TVL of $930 million represents 80% growth compared to the previous month and has been driven by the growth in Marginfi, Kamino and Orca. Lastly, SOL’s gains reflect an improvement in Solana’s NFT market.

NFT activity past 7 days, USD. Source: CryptoSlam

Data shows an impressive 56% increase in volumes, driven by sales in Tensorians and Mad Lads. In comparison, Ethereum NFT sales in the same period declined by 4%, with the leading collection, Bored Ape Yacht Club, experiencing a 57% weekly reduction in volumes.

The bullish momentum in SOL token price is attributed to an improved regulatory environment, increased demand for SPL tokens and airdrops, and higher network activity, including DeFi and NFT markets.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.


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About the Author: Daniel