Solana Top Gainer Among Crypto Majors After BofA Endorsement, Rising NFT Activity

Prices of solana bumped as much as 8% in the past 24 hours.

Jan 13, 2022 at 11:44 a.m. UTC
Updated Jan 13, 2022 at 3:41 p.m. UTC

Solana (SOL) led gains among the top ten cryptocurrencies by market capitalization in the past 24 hours. The price rose over 8% to $152 during the European morning hours on Thursday after a bounce from the $130 support level.

The move came after Bank of America said in a research note the Solana protocol’s low fees and high transaction speeds made it the “Visa of the digital asset ecosystem.” It could even usurp Ethereum’s current position as a leader among smart contract-enabled blockchains, the bank's analysts said.

“Solana prioritizes scalability, but a relatively less decentralized and secure blockchain has trade-offs, illustrated by several network performance issues since inception,” analyst Alkesh Shah noted, adding that the network was primed for consumer use cases such as micropayments and gaming.

Price-charts show that some resistance exists at current levels, which if broken could see SOL moving to the $170 level.

A relative strength index (RSI) readings of 53 suggests Thursday’s surge could have further upside in the days ahead. RSI is a price-chart indicator that measures the magnitude of price changes, with readings above 70 suggesting an asset is overbought and could be primed for a correction.

Solana hit resistance at $132. (TradingView)

However, SOL remains in a broader downtrend and is down nearly 40% from November 2021’s highs of $260, according to data from CoinGecko.

High speeds, cheap fees and NFTs

Unlike other blockchains like Bitcoin, which rely on complex computing rigs operated by miners, Solana works on a proof-of-history mechanism that powers its cheap and speedy blockchain. Network stakers validate transactions by verifying them against several network cores and considering the time which has lapsed between two transactions.

Such design helps create a faster network, which Solana developers claim can reach speeds of up to 65,000 transactions per second (tps). Technical documents suggest that the network could theoretically reach speeds as high as 28.4 million tps under optimum conditions.

Cheaper fees – as low as $0.00025 per transaction – have resulted in massive retail interest for products built on Solana, especially those involving non-fungible tokens (NFT). NFTs are blockchain-based representations of tangible or intangible objects.

The value of daily NFT activity on the network averages at around $1.8 million, data from analytics tool DeFiLlama shows. The figure peaked to $9.2 million on Jan. 6, 2021, the data shows.

Some investors say the quick adoption of NFTs on Solana, compared to other blockchains, showcases how a low-cost, fast network helps retail onboarding.

“Interesting how the NFT ecosystem on Solana is thriving now although it's built with features that are optimized for finance use cases (quick block time, low cost, fast finality),” said Arthur Cheong, founder of Defiance Capital in a tweet on Wednesday. “In fact, I think most user growth lately actually come from NFT side instead of [decentralized finance]."

Ryan Wilkinson, head of product of Blockasset.co, stated that the retail popularity of the network has attracted even more developers to build on Solana instead.

“The code for artists/creators to build their own NFT platforms and drops on Solana, such as Candy Machine, is open-sourced, and community events such as Metaplex office hours also help onboard many creative developers to try their hands at creating customized collections and innovate,” he told CoinDesk in a Telegram message.

“Projects such as GenesysGo and the Shadowy Super Coder NFTs show how NFTs on Solana provides key infrastructural benefits for the network which the whole ecosystem gets behind,” Wilkinson added.

UPDATE (Jan 13, 12:00 UTC): Corrects the first line in the second paragraph to say "high transaction speeds" not "high transaction fees."

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Shaurya is an analyst/editor for CoinDesk's markets team in Asia.