On Friday, Solana (SOL) gained another 11%, continuing to outperform the rest of the cryptocurrency market and dispelling concerns about a probable fire sale by the insolvent FTX.
According to data from CoinDesk, the cryptocurrency has now increased by more than 26% this week with today’s gain. Over the same period, the two leading cryptocurrencies, bitcoin (BTC) and ether (ETH), were up 10% and 3%, respectively. The CoinDesk Market Index (CMI), a broad proxy for the cryptocurrency market, increased by 8%.
Why has SOL’s price rallied?
With a 170% year-to-date increase, SOL has made a remarkable comeback as one of the best-performing digital assets this year with the Friday gain. This comes after Sam Bankman-Fried, one of the ecosystem’s key backers and investors, saw a stunning decline at the end of 2022, casting doubt on Solana’s future.
A U.S. bankruptcy court also permitted the FTX-Alameda estate to sell off its huge crypto holdings last month, including a $1.16 billion solana hoard as of late August. This sparked worries about SOL tokens being flooded onto the market in large quantities.
The Alameda FUD was less severe than expected, according to Lucas Outumuro, head of research at IntoTheBlock, who spoke to CoinDesk.
The FTX estate staked, or locked up, about 5.5 million SOL last week, which at the time was worth $122 million and helped to calm investor sentiment.
Outumuro also mentioned the potential role that SOL’s technical breakout against ETH may have played in the rise.
Meanwhile, according to asset management company CoinShares, investors have poured $24 million in net inflows into Solana-focused funds over the past week. As SOL continues to “assert itself as the altcoin of choice,” it was the biggest weekly influx since March 2022, according to James Butterfill, head of research at CoinShares.
According to a report on Thursday citing blockchain statistics from The Block, analysts at digital asset company 21Shares found that the Solana blockchain had increased network activity over the previous weeks.
As per the investigation, Solana recently turned on a technology upgrade that decreased the hardware requirements for validators and included an optional zero-knowledge-compliant transaction encryption.
“The recent increase in investment and user activity on the Solana network highlights the growing excitement surrounding this previously underappreciated upgrade,” remarked analysts from 21Shares.