Oct 30, 2023

Bitcoin (BTC) isn’t the only cryptocurrency on a tear recently. Solana (SOL) has also risen over 70% in the last 30 days.

Video transcript

Bitcoin isn't the only Cryptocurrency on a tear over recently, Solana SOL has also risen over 70% in the past 30 days. Joining us now to discuss this Nanson research analyst, Ali B. Welcome or welcome back. I believe uh Nanson published recently a report taking a look at Solana's total value lock nearly doubling since the beginning of the year. What's going on? What's sticking out to you the most? So what was happening uh is a classic um let's say uh the divergence between the fundamentals of Solana, you mentioned the TV L but there are also other elements of the fundamentals that were improving. And on the other hand, the market being really pessimistic with uh the price really uh being um flat year on year since uh since the FTF collapsed. So we um saw this misalignment and decided to publish the report um a month ago to just flag it to, to investors. So along those lines, as you noted that it's, it's down significantly. It's when we look at a longer term chart. I don't know if we have one here, but we look at a longer term chart. Salon is nowhere near what it was months ago, uh, back pre pre FTX collapsed is this sort of a dead cat bounce? And where is this, where is this interest coming from? Yeah, it's a great question. So, um, ok, so the, I guess the why the, of course, the, the, the, so, so the token is done is partly, of course, um, a product of the, of, of crypto markets, uh especially so called alt coins, um, doing um rather badly in a, in a bear market. Um And among Al Corn Solana, its particularly um not so well because we know that Seoul is a big part of Alameda FTX holdings uh that will have to be sold to facilitate the whole kind of bankruptcy process. So this was really a major um negative driver for, for investors because uh these holdings are 17% of their supply of. So, although ii I do have to say that when we look at when it was uh the, the rules of, of liquidating, so uh were such that it wouldn't have been a significant amount anyway, that would hit the market because the amount of Solana that FTX and Alameda were, were due, uh they wouldn't get it for a long time. So while they, they had all this potential liability, it, it wouldn't add liquidity into the market if you will. Uh is that correct? I mean, this is sort of the, so there has to be something else driving this if it's not uh concerns about just try the where whether or not uh these these coins hit the market, why, why then the excitement. So there was a vesting period indeed for, for soul tokens, which was to the earlier unlock was uh 2025. Uh But there were some rumors that there would be facilitation to unlock those tokens earlier. So you could argue there was still uncertainty around it. Uh But on the other side, so we had a bunch of really positive news, especially on the tech side. If you remember last year, there were quite a few episodes of down time for Solana and it wasn't the case at all in 2023 year to date, even with the same level of transaction, it hasn't been done. And we had other technological upgrades, for example, the state compression uh technology allows to mint NFTS literally to reduce the cost of minting by two K. So um it's, it's really significant in terms of what we differentiate Salana, which is the efficiency part um is is there has been this improvement and it has been noticed also by institutional players. So um you remember that Visa partnered with Ethereum for some of their technology um stablecoins and uh they announced recently that they, they would be also partner partnering with Solana for Cross Border us DC um stablecoin transactions because of this uh characteristic of those of Solana being more efficient. So um on the back side and partnership. It's uh it's good news and Visa, I think Visa also cited cost was one of the reasons it was efficient. But it was also that the idea that it was a fraction of what it would be. Do you think that this momentum is sustainable? It's a really big question. So like uh OK, so the Solana you mentioned is up 70% kind of uh month on month. Um There is uh uh kind of a cyclicality of the market happening like we are now arriving at the kind of so-called lower quality coins like Pepe leading uh the performance in the last seven days. So usually it's uh a cycle that starts with Bitcoin and then continue with AL coin and so on. So they could be that in that move basically, uh we are a little bit uh at the end of this, of this really big move for crypto in general because the lower quality coins are not ring. Uh But with, for Solana more fundamentally, we are still very positive in the, in the very long term just because of those fundamentals physically um that haven't really been yet reflected uh compared to Ethereum, for example. All right, we took a look at those charts at the beginning of the show, Bitcoin hovering around $34,500 talk to us about what else is standing out to you in the market. Uh What's really striking me is um basically the divergence um of crypto from the macro point, like we've seen traditionally the NASDAQ or the so called Manifest Manifest seven stocks and NVIDIA Tesla et cetera are really uh walking side by side with crypto or Bitcoin at least. Um And this hasn't been the case. So for me, it's a little bit intriguing uh that we are having this, this move from crypto. Um I think um part of it was really a very negative positioning. So we are tracking, for example, option market positioning um And it was very, very negative only two months ago. Um So we had a little bit of uh positioning adjustment happening uh on trading. So yeah, that's for me that I'm still a bit intrigued by the, by the macro element basically. And you obviously n and you guys have a lot of data, you guys see a lot of things happening uh w when you look at this price rally recently and we talked earlier about the potential of it being more than just excitement over an ETF what kind of data? What does your data tell you about the where when and how uh people are buying into this rally? Yeah, it's interesting. So, um so option investor are rather um very bullish right now. So we are tracking also derivative markets uh in terms of on chain the movements we are, we are seeing in terms of activity basically. Um We haven't seen really a lot of a lot of activity happening on chain that could match this price move. So usually if you look at historical bull markets, you have the price of course going up. But also um you have metrics like new addresses on chain, new addresses being created on chain uh kind of moving up also with the price and vice versa, like the new addresses metric, usually speaking, it was the case in 2018. It was the case in 2021 May, et cetera. And we haven't seen so far too much uh of this rally in new addresses, at least on Ethereum and other um basically smart contract chains. Uh It's been the case uh in Bitcoin slightly um Bitcoin new addresses, but it hasn't been the case. Um in other um basically um on chain metrics, which makes me think it was a combination of positioning being bearish um at least on the derivative market and then narratives um being delivered. So you could argue there was Bitcoin ETF there was real word assets, there are a few narratives uh but it's not really reflected in an activity at this stage. Ali, thank you for joining the show this morning. Thank you so much. That was Nanson research Analyst, Aurelie Beta.

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