Solana’s Sharp 2023 Rally Left Major Cryptocurrencies In The Dust

Solana’s SOL token had a banner year in 2023, outperforming several other major digital currencies as various factors combined to fuel aggressive price appreciation.

The cryptocurrency, which is the native digital asset of the Solana network, reached an annual high of nearly $125 around Christmas, CoinMarketCap data shows.

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At this point, the altcoin, which has generated quite a few headlines lately, was up more than 1,100% since the start of the year, additional CoinMarketCap figures reveal.

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While SOL pulled back over the next several days, it still climbed over 900% in 2o23, leaving other major cryptocurrencies in the dust.

These sharp price increases took place after the aforementioned cryptocurrency had a rough couple of years, rallying to an all-time high around $250.00 in late 2021 and then plummeting below $10 the following year.

The SOL token languished for much of 2023, stuck in the doldrums below $25 until October, when it experienced a sharp rally.

Multiple Factors Drive Gains

When explaining the impressive gains that SOL experienced in 2023, analysts highlighted multiple variables that helped drive price appreciation.

“Throughout 2023, several factors have contributed to the remarkable surge in Solana’s price, escalating from around $9 to $121 on December 25th, marking an impressive 1115% return,” said Hosam Mahmoud, a research analyst at CCData.

“One key driver has been the growing confidence in Solana’s performance, particularly its fast transactions, low fees, and increasing popularity,” he stated.

“Notably, in December, Solana experienced a rise in the number of active wallets and its transactions per second have been at record highs in 2023, reinforcing investor confidence,” said Mahmoud.

“This turnaround is especially significant considering Solana’s previous drop from a high of $259 in 2021, sparking widespread speculation about its potential,” the market observer added.

“Another factor is the broader positive developments in cryptocurrency regulations, particularly in the U.S., including the XRP & Grayscale lawsuit results and the diminishing impact of the FTX collapse on Solana,” the analyst emphasized.

“Despite the bankruptcy of FTX and the sale of its assets, including a significant amount of SOL tokens, investor sentiment towards Solana has remained largely positive,” he said.

“The third aspect is the generally bullish sentiment in the crypto market, as seen in the rising prices of Bitcoin and increased derivatives volumes. This indicates a growing appetite for risk among investors.”

“It certainly feels like there is renewed interest and optimism regarding Solana and it’s role in this next crypto cycle,” said Brett Sifling, an investment advisor for Gerber Kawasaki Wealth & Investment Management.

“I think there are a few things that are driving this interest, such as the amount of transactions per second in comparison to Ethereum, dominating Ethereum in daily NFT sales volume, and a flux of meme coins that has captivated retail traders attention,” he stated.

“I believe investors and retail users are getting tired of the slow transaction time and high gas prices in Ethereum and have found Solana to fulfill those needs for speed and capabilities. Which has been seen with the rise in Solana NFT volume compared to Ethereum,” said Sifling.

“Developers have now spent the last few years of the bear markets building great use-cases on the Solana chain and the eco-system is beginning to mature with better UX.”

Joe Lee, Founder and CEO of DefiDive, also focused on technological improvement evaluating Solana’s SOL token.

“Using a hypothesis of value investing, I explored the year-to-date technological achievements of Solana to provide a thesis that Solana is undervalued,” he stated.

“Nobel Prize winning economist Milton Friedman backed the notion that monetary velocity is central to a growing economy,” said Lee.

“In simple terms, he said that monetary velocity is a key indicator of economic growth. Monetary velocity explained simply states that the faster money can exchange hands, the easier a respective economy can grow.”

“Applied directly to the cryptocurrency industry, if we look at three separate, but established blockchains and their respective speeds, we see that Bitcoin currently performs 7 transactions per second (TPS) with a 10 minute block time.”

The Solana network, however, is benchmarked at 65,000 TPS with its proof-of-history consensus mechanism.

Interestingly enough, the SOL token failed to surpass $125 in 2023, while the price of bitcoin exceeded $40,000.

After reviewing the respective capacities of the Solana and Bitcoin networks, Lee pondered why the SOL token is so undervalued.

Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and SOL.

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