Solana’s Milestone Week: 5th Anniversary, ETF News, and Mixed Market Performance

One of the leading blockchain platforms, Solana, had a week of incidents that were both worth celebrating and difficult to deal with.

The network clocked five years as a fully functional and effective blockchain technology—a truly remarkable achievement given the often short-lived nature of many blockchain projects. But on the other hand, it had to deal with some not-so-great market performance mixed in with a few appearances of Solana’s name in some somewhat less-than-flattering contexts. Despite that, its week was capped off with what seemed to be a couple of big positive developments.

SOL, the native token of Solana, saw an increase this week of just under 1%, closing out the week of October 3, 2021, at just under $126 per token. That was an increase of $1.00 for the week. While this was a week of overall bullish movement in the crypto market, it seemed that Solana’s gains were mostly independent of broader market movement and were instead driven by movement in Solana’s DeFi ecosystem. Despite this modest price increase, Solana’s market capitalization held pretty strong, remaining right around $63.89 billion, while my favorite, SNY, remains pretty valiant at an open price around $1.09.

Not all metrics, however, were positive. Solana’s daily active addresses fell to 3.6 million, indicating a slight decline in user engagement. Furthermore, decentralized exchange (DEX) volume plummeted nearly 30%, to $10.04 billion. This downturn in trading volume stood out and seemed all the more pronounced given the busting-out, boom-bust nature of the broader crypto markets this past week. And yet, despite the downturn in DEX volume, Solana very much appears to be a serious, substantial contender in the DeFi space.

Although Solana did well enough in some respects to get the attention of a former major American bank, it was still keeping pace with some major competitions and facing a decent price tag of $86.01. If you were wondering whether Solana also saw the fortunes of its competitors rising along with its price, here’s a look at some of those rival blockchains:

While Solana was up 0.80%, its less popular competitors, BNB, XRP, and even Bitcoin, which bounced around pretty good between $80,000 and $85,000 (more compelling chart patterns in a bit), performed better.

The total value locked (TVL) in Solana’s decentralized finance (DeFi) sector also showed signs of weakness. It fell 3%, although this was far better than Ethereum’s 9.24% drop. However, Solana’s non-fungible token (NFT) market saw a significant decrease in users. The blockchain now accounts for 22.6% of the NFT market, compared to Ethereum’s 28.4% share. This means Solana is trending downward in the NFT space. Conversely, Ethereum doubled down on its completed regulation and is now mooning in both the DeFi and NFT sectors. This calls Solana’s future into question.

Even though Solana’s overall performance in the DeFi and NFT space was lagging, meme coins on the blockchain were having a full-on moment. Tokens of the type HEHE (+56%), GIGA (+29%), and POPCAT (+23%), for instance, showed striking increases. These tokens, which are driven more by community sentiment than by anything resembling fundamental value, seem to signify that folks are increasingly willing to speculate within the Solana ecosystem.

On the other hand, some meme coins saw a decrease, with MOTHER and FWOG dropping 22% and 14%, respectively. Nonetheless, meme coin market overall on Solana, despite many fluctuations, remained strong; a vibrant Solana meme coin market is a strange thing to consider when looking at the overall cryptocurrency market dreadfully declining in price. But one major question remains: how much is the Pump(.)fun platform, a decentralized application (DApp) for pumping meme coin prices really worth? Because, frankly, who really wants to invest in a DApp that promises gains of under 1% four weeks in a row? That’s not a guarantee; that’s a jigsaw puzzle missing a few pieces.

When considering the most notable advancements, Solana experienced some huge wins in the fintech sector. One of the highlights was the announcement from CME Group that it would begin offering futures trading for Solana. This development is likely to lead to a noticeable uptick in institutional participation in Solana, and it’s possible that the next big step for the ecosystem will be the creation of Solana-based exchange-traded funds (ETFs). Solana futures allow for a more formal and controlled way for traditional investors to get involved with the ecosystem, and they could help push Solana towards a more mainstream foothold.

In another notable occurrence, an inflation-reduction proposal, SIMD-0228, was turned down even though it had 61.4% approval. The rejection of this proposal has ignited discussions in the Solana community about governance and the network’s future path. Solana seems to be suffering from a lack of community consensus on important governance matters, and this proposal’s seeming failure to garner enough community support to pass it is just another in a string of such occurrences.

Celebrating its fifth anniversary, Solana is at a critical junction. The recent launch of futures on the CME and a rise in total value locked (TVL) are good news; they, however, cannot mask the overall picture—the network is struggling to keep users engaged and to truly grow its NFT and DeFi dominance. At the same time, the Solana Foundation and the network developers must work on issues of governance (as in, how will the network run in a truly decentralized manner?) and on complaints regarding the network’s scalability and stability—issues that, if not resolved, could really cut into Solana’s competitive edge over Ethereum.

In the next few weeks, we will see whether Solana can return from its market stagnation to reclaim its status as a top blockchain for both DeFi and NFTs. As Solana keeps on innovating, it must not do so at the expense of the grassroots community that has propelled it this far, nor allow its institutional presence to overshadow community initiatives, if the balance that is Solana is to achieve long-term sustainability in the ever-changing crypto landscape.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

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