All financial markets have a degree of unpredictability. They can be influenced by a wide range of internal and external factors, and fortunes can turn in the blink of an eye. In such an unregulated market, it is not uncommon to see a sudden rise of ten or more percentage points in an hour or so, only for the price to fall off just as rapidly as sellers take easy profits.
No other markets are as volatile as the crypto market. The price of these digital assets can fluctuate wildly, with sweeping peaks and troughs occurring over a matter of hours, or even minutes. In this article, we take a look at the Solana price and discuss why it has rebounded. Read on to find out more.
What is Solana?
Solana is a blockchain network that uses the SOL cryptocurrency. The platform is designed to host decentralized applications and offers scalability benefits. The network is open-source with a base headquartered in Geneva.
Solana offers exceptionally high transaction speeds and low fees, far lower than those seen on rival networks such as Ethereum. Additionally, Solana uses something of a unique consensus mechanism called proof of history (POH), which is implemented in conjunction with a proof of stake (POS) system.
POH optimizes transaction processing speed by labeling transaction blocks with timestamps. This makes the verification process far more efficient, improving transaction speeds.
Despite only being launched in 2020, the asset has quickly established itself as one of the biggest in the industry. At its peak, it was the fifth-largest cryptocoin by market cap, but has since fallen to tenth place.
How has Solana Performed?
As we touched on earlier, crypto markets are extremely unpredictable and can be influenced by a wide range of different factors.
Solana is certainly no exception, and in November 2022 the price plummeted, along with the price of most other cryptocurrencies. In the space of three days at the beginning of November last year, the Solana price fell from $36.71 to $14.00, a drop of nearly 90%.
What was behind this turn of events? The trigger was the collapse of the FTX cryptocurrency exchange, which sent crypto markets into meltdown and caused chaos throughout the industry.
FTX was one of the world’s leading crypto exchanges, and the company was valued at $32 billion at the beginning of 2022. The scandal hit in November of that year, as what at first appeared to be issues with accounts was revealed to be fraudulent activity. Billions of dollars that users had poured into the platform were lost, and the exchange rapidly collapsed, eventually filing for bankruptcy.
What is Behind the Solana Rebound?
After the collapse of FTX, the Solana price remained low and there was very little investor activity. In fact, the price actually continued to fall, reaching a year low of $9.59 on 30 December 2022.
However, as the year turned, so did Solana’s fortunes, and the cryptocurrency’s price started to gradually climb again. By 15 January 2023, the Solana price had reached $24.30, growth of over 86% from the low point seen during the previous month.
Since the lows of December, Solana has grown by approximately 18%. This has been a remarkable turnaround and has happened much faster than anyone expected. Many assumed that cryptocurrencies like Solana would struggle for months after the FTX scandal made global headlines and sent markets haywire.
Solana’s growth at the start of the year can be explained as natural growth. After all, the only way was up from the lows at the end of 2022. However, as the asset’s price continued to climb throughout the spring, several events helped buoy it and keep it afloat in what was still a reeling and vulnerable market landscape.
The first of these events came in March when the news that Solana was to adopt the Helium protocol. This news helped encourage investors who began pouring more money back into the asset.
Next, news broke in April that the Solana blockchain had the second-highest number of active wallet addresses in the entire industry, beating close rival Ethereum with a total of 5.8 million wallets to Ethereum’s 5.2 million.
Later that month, the launch of the Solana mobile phone helped push prices up even more, ensuring the coin’s value never returned to prices seen during the crisis in the previous year.
How Has Solana Performed Recently?
While the performance at the start of the year will have given investors hope, things took a turn again at the beginning of June, as Solana’s price dropped to 13.80, the lowest it’s been so far in 2023.
What happened? The price plummet can be linked directly to a filing made by the US Securities and Exchange Commission, who launched legal action against the crypto exchange Coinbase and leveled allegations against a number of cryptocoins, Solana included, accusing them of being unregistered, and therefore unsafe, securities.
There are a number of reasons behind Solana’s rebound, including the integration of the Helium protocol and the release of its mobile phone. However, a recent price dip caused by the SEC incident is a testament to just how reactive and volatile the crypto market can be.