Why is SOL On Fire?

Solana (SOL), the native cryptocurrency of the Solana network, has surged over 13.58% in the last 48 hours, reaching an intra-day high of $188 on May 21. Its monthly returns are around 18%, with a 65% increase over the last 90 days.

This impressive performance has been accompanied by an 80% leap in trading volume, reaching $5.5 billion. As a result, Solana’s market capitalization has grown to $80.5 billion, cementing its position as the fifth-largest cryptocurrency, according to CoinMarketCap.

Several factors have contributed to SOL’s rise in 2024, including the continued outperformance of Solana-based memecoins and positive news updates boosting the demand for riskier assets like Solana.

One significant factor is the news that the U.S. Securities and Exchange Commission (SEC) is engaging issuers and exchanges about spot Ethereum exchange-traded funds (ETFs), increasing the odds of approval later this week. The potential approval of a spot Ethereum ETF has sparked discussions about the possible implications for other top cryptocurrencies, including Solana.

Matrixport co-founder Daniel Yan suggested that a “buy SOL/ETH” trade would be better than “buy ETH” if an Ethereum ETF is approved, reasoning that “SOL will be the No. 1 next in line if the ETH ETF gets approved.” Similarly, analyst and X user Gumshoe argued that a spot Ethereum ETF approval is “more bullish for SOL than ETH,” asserting that there is “less reason to buy ETH” if the ETF is rejected, making “SOL more attractive.”

As market participants remain hopeful about the SEC approving a spot Ethereum ETF, SOL has been among the beneficiaries of the crypto price surge. Since April, over one million new tokens have been created, with over 370,000 on Ethereum and over 640,000 on Solana. According to a Dune Analytics dashboard, 466,914 of the 643,000 new tokens on Solana were memecoins.

The rise in Solana token launches aligns with the remarkable price performance of memecoins within its ecosystem. The recent market recovery has seen significant price increases for Solana-based memecoins like Bonk (BONK), up 35% in the last 24 hours, and notable gains for Popcat (POPCAT) and Myro (MYRO), which have risen by 13.8% and 7.9%, respectively.

The growing number of new tokens, especially memecoins, on Solana indicates heightened activity and adoption of the platform. More token launches lead to increased transactions and network usage, driving demand for SOL.

Despite some signs of topping patterns, SOL’s market setup suggests a sustained recovery for the layer 1 token. The recent support bounce near $170 has increased interest, with CoinShares reporting approximately $4.9 million in inflows into Solana investment products last week.

Currently, SOL is trading 15% below its $210 high reached on March 18. The 50-day EMA is at $154, and a positive RSI indicates favorable market conditions. Breaching the $200 resistance suggests that SOL could be on the path to $210, though this level may trigger profit-taking, potentially leading to a deeper correction.