A seven-day rally saw Solana (SOL) replace Polygon as the 10th largest cryptocurrency asset by market cap on January 15, per data from CoinMarketCap.
Solana issues the SOL token for the development of decentralized finance (DeFi) projects that offer financial products, loans, mortgages, and other services. Many analysts attribute SOL’s resurgence to the demand for DeFi projects.
The SOL token is linked to an on-chain cryptocurrency exchange called Project Serum, created by Sam Bankman-Fried (SBF). Serum is a protocol and ecosystem that enable high speed and low transaction fees. Institutional and retail investors can benefit from its central limit order book and on-chain matching engine.
Scalability, speed, and affordability make the Serum-supported Solana a great choice for large-scale DeFi projects, allowing developers to create decentralized applications (dApps) on the blockchain at reduced costs.
FTX’s collapse in November negatively affected SOL’s price performance because of its relationship with SBF. SOL prices fell by 73 percent between November 6 and December 31. From $32.72 on November 5, they ended the year at $9.96.
The resurgence of SOL
Despite the rapid crash in prices, SOL rebounded very strongly, increasing by 79 percent over the last seven days, from $5 billion in market cap to over $9 billion. SOL is currently trading at $23.39, a rise of roughly 135 percent. Active wallets on Solana also increased from nearly 45,000 per day to 83,000.
“While traders are celebrating the resurgence of #Bitcoin (back over $21k) and #Ethereum (back over $1,550), #Solana is the real star as the weekend is kicking off. Up +22% in the past 2 hours alone, $SOL has been fueled by liquidated shorts,” on-chain analytic firm Santiment said on Saturday.
Santiment explained that SOL prices rebounded strongly due to a “short squeeze”, which occurs when investors bet against an asset and are forced to buy it to limit their loss.