Solana recently saw a significant surge of over 20%, reaching $130 and outperforming many high-cap cryptocurrencies. This rapid increase came following a rebound from market fear, showcasing Solana’s strength in the face of volatility. Additionally, Solana’s relative strength against Ethereum was evident as the SOL/ETH pair broke through early February resistance. Furthermore, Solana’s DeFi revenue surpassed Ethereum’s total, indicating its growing dominance in the industry. With high revenues, a strong SOL/ETH ratio, and impressive transaction throughput, Solana’s breakout seems to be well-deserved.
However, looking back at Q1, Solana faced struggles with a drawdown of over 30% and losing its $100 billion market cap threshold to become the sixth-largest cryptocurrency behind Binance Coin. On-chain flows showed a significant number of SOL tokens being unstaked, leading to a supply overhang. This, coupled with aggressive whale distribution patterns, shifted the market balance towards the sell-side. Q1 was a period of structural unwinding for Solana, with bearish liquidity dynamics outweighing any bullish signs.
Despite the challenges faced in Q1, Solana’s on-chain dynamics have started to show signs of improvement, with Total Value Locked (TVL) reaching a high of $8.54 billion in April. The resurgence in on-chain activity hints at a potential turning point for Solana. With Solana regaining dominance both technically and on-chain, speculation is mounting around a potential breakout. The long-term HODLer Net Position Change has turned positive, indicating sustained inflows into long-term wallets and a prolonged accumulation streak.
Solana’s current phase of structural reaccumulation may lead to a range-bound price action in the near future, as retail participation remains subdued. The market is reliant on long-term holders to maintain stability and drive price growth. Historical trends suggest that periods of structural accumulation often precede impulse rallies, pointing towards a potential rally for Solana in the future. However, the divergence between long-term accumulation and retail dormancy poses challenges that may test the patience of holders. Only time will tell if Solana’s long-term holders will be rewarded for their patience as the market awaits a potential breakout.
