Solana is up 35% over the past week, adding to its 2023 rally of better than 500%

The SOL cryptocurrency has bounced back in a big way in 2023. Illustration by Fortune

As many major cryptocurrencies slipped into the red on Thursday following a rally earlier this week, one altcoin continued its hot streak.

SOL, the native cryptocurrency of the Solana blockchain, hit its highest price since May 2022, rising to $68 early Thursday. While retreating to $62 by the afternoon, it’s still up more than 35% on the week, according to CoinGecko. SOL is up more than 500% from a Jan. 1 price of $9.97.

A jump in Bitcoin’s price over the past couple of weeks helped lift the overall market. The most popular cryptocurrency advanced to just under $38,000 last week—and again on Wednesday—before falling back to earth. The coin was up less than 1%, near $36,600, as of publication.

Fueling that rise is speculation tied to the Securities and Exchange Commission’s impending action on a spot Bitcoin ETF, which analysts say could be approved by early January.

Bitcoin’s rosy performance has helped lift a group of altcoins led by Solana, the sixth-largest cryptocurrency by market cap and a main competitor to second-ranked Ether.

Exchange-traded products representing an index of alternative coins increased by 26% in October, according to a Thursday report by digital asset investment company Fineqia. Meanwhile, ETPs holding SOL increased 172% in assets under management last month to $279 million from $102 million at the end of September. Last week alone, investors poured $12 million into ETPs tracking Solana, while pulling back from funds related to other altcoins like Litecoin and XRP, according to a report by CoinShares.

SOL bottomed out near $9 toward the end of 2022 in the wake of FTX’s meltdown. The coin had been mentioned among Sam Bankman-Fried’s favorites, and it was mentioned frequently during former the FTX CEO’s trial, but investors appear to have shrugged that off.

The Solana network is in the process of rolling out several improvements and has vastly improved on its downtime problem, which in past years took the network offline for hours at a time. The network has only had one such incident this year.

Another possible reason for Solana’s recent price increases could be a significant uptick in liquid staking, including through applications like Jito, Marinade, and MarginFi, said Max Shannon, a research analyst at CoinShares. Another driver could be an increase in open interest volume and funding rates fueled by a surge in liquidations, while some investors may just see it as a sound play, Shannon added.

“The 94% price decline from peak to trough makes it an attractive proposition regardless of fundamentals, and investors could be starting to realize this,” Shannon said in an email. 

Another analyst, Matteo Greco of Fineqia, cautioned that Solana’s price moves are closely tied to its pitiful performance near the end of 2022. Due in part to FTX and Alameda Research’s close association, and substantial exposure to SOL, the token fell drastically.

Despite SOL’s massive uptick, Greco noted, it’s still way off its all-time high of nearly $260.

“The remarkable uptrend in SOL,” he added, “can be directly linked to the severe impact the token endured during the downturn.”