Solana Price Surge Above $230 Sparks Optimism for New All-Time Highs

Solana’s native token, SOL, has experienced a significant rally, surging 13% from a local low of $203.30 on December 10 to reclaim the $230 level. This price movement has sparked optimism among traders, as both derivatives and on-chain metrics suggest that the cryptocurrency could be poised for further gains. As market participants speculate whether the recent correction has ended, some are now eyeing a potential price target of $260 and beyond for SOL.

Solana’s Recent Highs and Underperformance

Solana recently reached a new all-time high in 2024, peaking at $264.50 on November 22. However, the rally couldn't be sustained, and since then, SOL has underperformed compared to the broader altcoin market. While the altcoin market capitalization rose by 18% from November 22, SOL's price fell by 12%, raising questions about the factors driving this divergence.

Despite this, SOL’s success is partially linked to the popularity of Solana’s SPL tokens, including several memecoins. However, this sector has seen a slowdown, with coins like Dogwifhat, BONK, and Jupiter experiencing price declines of 8%, 9%, and 12%, respectively, over the past week. Other projects, including POPCAT and Wormhole, also saw sharp declines of around 11% during the same period.

On-Chain Metrics and Concerns About Volume

One concerning trend for Solana is the 63% drop in on-chain transaction volumes on its network in the week ending December 9. This raises questions about the sustainability of SOL’s recent price spike. However, it’s worth noting that this decline in activity was not exclusive to Solana. Other major blockchain networks, such as Ethereum, BNB Chain, and Avalanche, also saw similar reductions in on-chain volumes.

MEV Strategy and SOL’s Underperformance

The reason behind Solana’s underperformance relative to the broader market remains unclear, but some traders, including WazzCrypto, suggest that a strategy known as 'sandwiching'—a form of maximal extractable value (MEV)—could be partly responsible. Sandwiching involves placing orders before and after a target transaction to capitalize on the price fluctuations it causes. WazzCrypto’s analysis points to one instance where a single address reportedly executed 50% of the trading volume of the MOTHER token, while most other traders suffered losses during similar token launches.

Derivatives Market and Improved Sentiment

The recent cryptocurrency market crash on December 9, which led to a clearing of excessive leverage, may have benefited Solana. SOL futures open interest dropped by 12%, now sitting at 22.8 million SOL. This correction resulted in a drop in the cost of bullish leverage, falling below 1% for the first time in over a month. The market appears to be in healthier conditions now, especially considering that total SOL futures open interest has reached $5.2 billion.

Institutional Optimism and Solana ETF Expectations

Investor sentiment surrounding Solana has been further boosted by a target price of $750 set by Bitwise, a cryptocurrency exchange-traded fund (ETF) provider. Bitwise highlighted factors such as growing institutional investment, a more favorable regulatory environment, and the increasing number of serious projects launching on the Solana network as key drivers of optimism. This, according to Bitwise, could propel Solana to become a more dominant player, especially in the memecoin sector.

Additionally, traders are increasingly optimistic about the potential approval of a Solana ETF in the U.S., particularly following the resignation of Securities and Exchange Commission (SEC) Chair Gary Gensler. The prospect of institutional capital flowing into Solana through an ETF has generated significant enthusiasm, fueling expectations for continued growth in early 2025.

Looking Ahead

With healthy derivatives markets and a growing sense of optimism surrounding Solana’s future, SOL investors have several reasons to be hopeful. As the market anticipates a Solana ETF approval and potential further price gains, the outlook for SOL remains positive heading into 2025. Whether SOL can break through the $260 mark and push toward new all-time highs will depend on a combination of market sentiment, on-chain activity, and broader crypto market trends.