Solana Rallies 26% in a Week Despite FTX Sale Fears; What's Behind the Move?

Alameda FUD turned out to be less severe than anticipated, one analyst noted.

AccessTimeIconOct 20, 2023 at 3:37 p.m. UTC
Updated Oct 23, 2023 at 4:16 p.m. UTC
  • Solana jumped 11% Friday and is one of the best performing crypto assets this year with a 170% gain.
  • Investor worries about FTX selling tokens were overblown, an IntoTheBlock analyst noted.
  • Rising activity on the Solana network, massive influx into digital asset funds and a recent tech upgrade also likely contributed to the rally.

Solana (SOL) is higher by another 11% on Friday, continuing to outperform the rest of the crypto market and defying worries of a potential fire sale by bankrupt crypto exchange FTX.

With today’s advance, the cryptocurrency is now higher by more than 26% this week, CoinDesk data shows. Crypto leaders bitcoin (BTC) and ether (ETH) were ahead by 10% and 3%, respectively, over the same time frame. The broad crypto market-proxy CoinDesk Market Index (CMI) advanced 8%.

"This is some of the strongest buying activity we’ve seen since July," David Shuttleworth, research partner at Anagram and former managing director at Binance Labs, told CoinDesk.

Why has SOL’s price rallied?

Friday's gain adds to SOL's remarkable comeback as one of the best-performing digital assets this year with a 170% year-to-date rise. This after Solana’s future was in doubt at the end of 2022 following the spectacular fall of Sam Bankman-Fried – one of the ecosystem’s top supporters and investors.

Additionally, a U.S. bankruptcy court last month granted the FTX-Alameda estate permission to liquidate its massive crypto holdings, which included a $1.16 billion solana stash as of late August, spurring fears about SOL tokens being dumped en masse on the market.

"The Alameda FUD turned out to be less severe than anticipated," IntoTheBlock head of research Lucas Outumuro told CoinDesk.

Last week, the FTX estate staked, or locked up roughly 5.5 million SOL worth $122 million at the time, easing investor sentiment.

Outumuro also noted SOL's technical breakout against ETH, which could have contributed to the rally.

SOL breakout versus ETH (IntoTheBlock, TradingView)
SOL breakout versus ETH (IntoTheBlock, TradingView)

Investors, meanwhile, have flocked to Solana-focused funds, asset manager CoinShares reported, with $24 million of net inflows last week. It was the largest weekly influx since March 2022, as SOL continued to "assert itself as the altcoin of choice," CoinShares head of research James Butterfill said.

The Solana blockchain enjoyed increasing network activity over the past weeks, digital asset manager 21Shares researchers noted Thursday, in a report citing blockchain data by The Block.

Active addresses on the Solana network (The Block)
Active addresses on the Solana network (The Block)

The analysis also noted that Solana recently activated a tech upgrade that reduced validator hardware requirements, and added optional zero-knowledge-compatible encryption for transactions.

"Solana's recent surge in inflows, coupled with a consistent rise in daily active users for four consecutive weeks, underscores the enthusiasm for this overlooked upgrade," 21Shares analysts said.

Edited by Stephen Alpher.


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Krisztian  Sandor

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.