Solana (SOL) has recently become a focal point of discussion among investors and analysts. After surging from below $22 to a high of $210 within six months, and currently trading at around $174—a nearly 700% increase—questions arise about the sustainability of its price rally.
Despite the impressive surge, SOL remains 50% shy of its November 2021 all-time high of $260. The recent consolidation pattern over the past four weeks suggests a cooling off period. As the market looks forward, understanding the underlying fundamentals becomes crucial.
Jamie Coutts, Chief Crypto Analyst (CMT) at Real Vision, notes in an analysis, “While Solana’s outperformance has waned in the past month, it is still the best-performing network in the past 12–18 months by a country mile. […] Solana’s price adjustment seems abrupt but is aligned with fundamental indicators that suggest a stabilizing rather than diminishing value proposition,” Coutts explains.
Solana Fundamentals Remain Strong
Solana’s Daily Active Users (DAUs) have risen dramatically, up more than 400% over the last nine months. This growth places Solana in a rarefied group of networks boasting over 1 million DAUs. Despite not reaching its 2021 peak DAUs, which may have been inflated by synthetic activities linked to the FTX exchange, the nature of engagement on Solana has evolved.
“The ecosystem is maturing; the engagement we see today is fundamentally different—more diverse and significantly more integrated with real-world applications,” Coutts remarked. He highlighted the burgeoning sectors contributing to this growth, including artificial intelligence, decentralized finance, consumer applications, and the burgeoning memecoin and NFT spaces.
With a significant retracement from its 2021 peak price, Solana’s market capitalization has still managed to hit new highs this cycle, suggesting a broadening base of investment and valuation recalibration. “The Network Value to User (NVU) ratio indicates that while the asset appreciation is notable, it’s the user growth that provides a compelling story for Solana,” Coutts notes.
At present, Solana’s NVU ratio fluctuates between 50-100, reflective of a balanced growth-to-value dynamic when compared with other networks where speculative value often outstrips user growth.
One of the standout metrics for Solana this cycle has been its fee revenue, which has seen a sixfold increase in a nine-month period. Daily fees now average $1.8 million, a fortyfold increase. This surge is largely attributable to the network’s increasing utilization across various applications.
“Fee income not reaching its peak is a misnomer; what’s crucial is that the financial underpinnings of the network—highlighted by fee income—are stronger than ever,” Coutts emphasized. He also compared Solana’s fee income, which reached about 20% of Ethereum’s in March, demonstrating its growing financial stature within the ecosystem.
Solana Vs. Ethereum And Future Outlook
While Solana still lags behind Ethereum in terms of total dApps, its economic indicators are robust. With 134 dApps, compared to Ethereum’s 2,702, Solana’s dApp cash flow intensity is second only to Ethereum, indicating a high monetization capability per application. “Solana’s smaller, more potent suite of applications is driving economic efficiency that rivals even the largest networks,” states Coutts.
Despite the speculative components associated with memecoins and airdrops driving part of the transaction volume, Solana’s adjusted fee growth metric isolates and highlights genuine economic activity. With a staggering real fee growth rate of 3,259.7%, Solana leads all networks in this metric.
“While some underlying activities might be transitory, the intense and growing usage of Solana’s blockchain is undeniable evidence of its utility and viability,” Coutts concludes.
As Solana continues to develop and expand its ecosystem, the fundamental analysis underscores a network that not only maintains robust health and economic vigor but is also poised for future growth. This paints a picture of a blockchain platform that, despite market volatilities, remains a leading player in the crypto landscape, backed by strong fundamentals and promising growth metrics.
At press time, SOL traded at $173.47.
