The Pun is Setting in the West
Solana has been on a tear for weeks and is now actually ahead of where it was before FTX collapsed. Might it be time to fade the rally?
Before any Solana (SOL-USD) bulls go and lose their shirts, I’m still long SOL overall. This post is strictly a tactical trade. So if the notion that someone might fade the exuberance is too damaging to the confidence in your favored shitcoin cryptocurrency to handle, please get a grip. I like Solana. I’m rooting for it. Now let’s proceed.
Here are some of the titles of emails I’ve receiving from crypto newsletters in recent weeks - I swear I’m not making these up:
“Set My SOL on Fire” - October 19th, Blockworks Research
“Life and SOL of the Ecosystem Party” - October 23rd, Messari
“Here Comes the SOL” - October 30th, Decrypt Media
“SOL Continues Shining” - Today, Blockworks Research
We are way beyond this being punny. I mean funny…. please don’t leave.
In mid-September I wrote “Solana: Sell The Rumor, Buy The News?” for Seeking Alpha. While I disclosed that I’d started buying SOL again for the first time in months, I also made mention of certain things that I thought would be wise to pay attention to before getting overly exposed to Solana. With the context that Visa V 0.00%↑ had announced the company would be utilizing Solana to settle transactions through its crypto pilot, it felt like Solana had possibly bottomed out last month.
Here’s what I said at that time in the Seeking
Going forward, I think it makes some sense to pay attention to the circulating market cap of USDC on Solana and how that trend compares to other blockchains. Over the last month, Solana has experienced an 8.7% decline in circulating USDC on the network. This is inline with a chain like Avalanche but behind Polygon and Ethereum. At the third largest circulating cap of USDC on any one chain, I'd like to see Solana distance itself from Polygon and Avalanche and potentially even overtake Arbitrum as the second-largest blockchain for USDC supply for me to make Solana a significant holding in my crypto portfolio again.
In the table below, I have the USDC balances on each of the top 5 blockchains at the time of the Seeking Alpha article:
It’s not surprising seeing all of the USDC balances down in the last 6 months but it is somewhat surprising seeing Solana’s USDC balance down more than that of Ethereum and Arbitrum given the Visa news. Some of the other metrics I highlighted in that piece don’t look all that great either:
Solana’s fully diluted price to fees valuation is higher than it was last month. Furthermore, Daily Active Users in September were actually below August. We got a slight bounce in October, but it’s nothing to write home about.
Total Value Locked looks better when measured in dollars but it’s entirely due to price and nothing more. Adjusted for SOL, the amount of Solana coins in DeFi protocols is actually down to 11.2 million - which is the lowest level since February. The point is, I’m not seeing indications of real fundamental improvement to Solana. What we’re observing is a improvement in sentiment and that’s about it. Which is totally fine, but I do wonder if technicals will start to matter now.
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