Over the past two years, Solana has experienced a staggering price appreciation of +2,143%, leaving investors and market speculators alike in awe. To unravel the mystery behind this dramatic ascent, we’ll leverage new breakdown metrics to examine the underlying capital flows driving Solana’s success.
A Comparative Analysis of Major Assets
Solana’s remarkable recovery has allowed it to outperform both Bitcoin and Ethereum on 344 out of 727 trading days since the FTX event. This impressive feat underscores the substantial growth and demand for the asset. Furthermore, Solana’s ability to outpace its competitors highlights its growing influence in the cryptocurrency market.
Capital Inflow Comparison
To assess the flow of capital into each network, we’ll examine the relative Realized Cap change across Solana, Bitcoin, and Ethereum. Since the December 2022 low, Solana has accrued a considerably larger percentage increase in capital than both Bitcoin and Ethereum across 389 out of 727 trading days. This significant influx of capital has played a crucial role in driving Solana’s price appreciation.
Unpacking Solana’s Demand Profile
To evaluate the demand-side momentum, we’ll track the capital inflow of new investors using the Hot Realized Cap metric. This measure reveals that new investor demand for Solana has, for the first time in history, surpassed Ethereum’s. This milestone underscores Solana’s growing appeal to new investors and its increasing influence in the cryptocurrency market.
Investigating Solana’s Capital Flows
By examining the Net Realized Profit/Loss metric, we can visualize the daily change in on-chain capital flows for Solana. This analysis reveals that Solana has consistently maintained a positive net capital inflow since early September 2023. This sustained influx of capital has been instrumental in driving Solana’s price appreciation.
Granular Analysis of Profit-Taking
To gain a deeper understanding of the profit-taking dynamics, we’ll utilize age breakdowns of the realized profit metric. This analysis highlights that coins aged 1d-1w, 1w-1m, and 6m-12m are contributors to sell-side pressure. Notably, these cohorts have accounted for a substantial 51.6% of all profit realized, demonstrating a balanced distribution of market influence.
Market Assessment: Is Solana Overheated?
To evaluate the market’s temperature, we’ll employ the MVRV Ratio. This metric suggests that the SOL price is consolidating between the mean and +0.5 standard deviation range, indicating a relatively heated market with potential room for further growth. However, it’s essential to monitor the market’s dynamics closely, as a significant deviation from the mean could signal a potential market top.
Summary and Conclusions
In conclusion, Solana’s remarkable rise has been fueled by significant capital inflows from a wide distribution of investors. As the market continues to evolve, it’s essential to monitor the underlying capital flows and demand dynamics to anticipate future price movements. By leveraging these insights, investors can make more informed decisions and navigate the complex cryptocurrency market with confidence.
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