Solana (SOL) is dubbed by many as the “Ethereum killer”, and it has clearly obtained its second breath ever since the infamous China’s crackdown on cryptocurrency mining in April, as it more than doubled in price in the last month, becoming the seventh-largest cryptocurrency by market cap. However, among the cryptocurrencies we see a much more peaceful coexistence than in the equities universe, as external regulatory threats pose a greater risk for their entire community, so they prefer to jointly resist them rather than fiercely compete against each other.
Just like Ethereum, Solana is a decentralized open-source blockchain able to support smart contracts and D-apps (as we know, D-apps are gaining momentum applications that use Ethereum to disrupt business models or invent new ones). SOL and other non-Ethereum public chain tokens are less affected by market volatility, as they enjoy obvious differentiation within the market.
Solana was founded in 2017 by Anatoly Yakovenko, a former QUALCOMM Incorporated (QCOM) engineer. Early investors in Solana have been handsomely rewarded. Solana is very quickly growing its ecosystem and, as I already mentioned, is now the seventh largest cryptocurrency by market cap. It boasts capacities exceeding Ethereum ones in terms of transactions per second and transacting cost. Having said that, I don’t think Solana will displace Ethereum, especially in the DeFi space, but there is plenty of room for both to coexist. Back in June, Solana secured funding of $314 million through the sale of private tokens. This has gone a long way in legitimizing Solana as a platform, and the money raised was earmarked towards expanding the platform’s presence in Decentralized Finance (DeFi).
Strong presence in the NFT market as a big contributor to its success. Solana is one of the hottest places to buy and sell NFTs. Just two days ago, the platform saw its first million-dollar NFT sale. Recently Solana announced its fourth hackathon, called “Ignition”. This is a chance for DeFi developers to connect, share ideas and compete amongst each other for prizes of up to $5 million.
Nothing foreshadowed a shock to the SOL’s firming footing among its peers, but on September 14th, Solana’s network crashed – the service was interrupted. Due to the outage, the beta version of the Solana network did not function for almost a day. Decentralized applications that were running on the Solana blockchain also stopped working.
What was the reason for that emergency? The main reason for the crash was the Raydium exchange, whose bots made a massive purchase of SOL tokens. The network simply could not accommodate such an abrupt load surplus. Validators were unable to determine the priorities of transactions. Because of this, the SOL’s blockchain nodes were split.
SOL/USD fell over 19% to $137.15 on September 14. The sell-off continued in the following sessions, exacerbated by concerns that Solana is more centralized than its main competitor Ethereum.
What is SOL’s near term outlook in terms of both its gravity against USD and popularity among crypto traders measured by its trading volume? As we see from the above chart, the main concern is the dropping volume, not its price dynamic. Speaking about the latter, we see strong support at $137, which wasn’t broken. The close of the current downside candle can indicate a starting point for buyers where the implied potential downside is relatively small compared to the observed potential return. As targets for fixing profits, we single out the Fibonacci retracement levels to the current decline of 0.5 and 0.79, which corresponds to $175 (10% growth) and $199 (+25%).
Any network outage always causes a nervous reaction among crypto traders and investors, as they try to get out of the asset “just in case”. After all, we talk about the essence, i.e. stability of the blockchain infrastructure. So far, all similar episodes were successfully resolved in the past, although Google search keeps relevant records in its archives, so reputation is definitely being impacted. Whether the Solana developers will be able to prove that their network is reliable will be tested in the near future, but so far nothing indicates otherwise. SOL representatives said that all necessary measures will be taken to prevent possible future hacking attempts.
