Solana’s strong price performance wasn’t the most expected thing for most crypto-currency market participants. Given the enormous pressure the asset faced after the FTX implosion and the massive amount of coins in free circulation, we shouldn’t really be seeing the price movement we’re seeing now. However, there are a few reasons behind this.
Users are sleeping on SOL
All of the above factors have not gone unnoticed as the majority of traders and investors are missing out on Solana, not considering it as a potential investment, based on the funding rates and trading volumes we saw earlier.
🕕 The #FOMC meeting on interest rates is 2 hours away at 19:00 UTC. So far, markets have been rallying in anticipation of good news for the markets. Prices are headlined by #Solana rebounding to $14.80. Social dominance & funding rate staying low is key. https://t.co/uPDzqHqFb3 pic.twitter.com/SpU6gJgYzH
– Santiment (@santimentfeed) December 14, 2022
However, the lack of social recognition and low funding rates are generally indicators of continuation, as there is no selling pressure from Solana holders in the medium to long term. This will change when social indicators around SOL recover, reflecting a return of potential sellers to the market.
Financing rates at “usual” levels
Low funding rates are a sign of low liquidity and, quite often, of decreasing volatility in the market. On the other hand, abnormally high funding rates increase the potential for a spike in volatility in both directions. In Solana’s case, rates are at a moderate level, sufficient to bring volatility back into the market, without causing too much of a jolt that would cause a rapid reversal in prices.
Unfortunately, both funding rates and SOL’s social recognition are temporary indicators that will rise to extreme values if the market rally continues. But at the same time, none of the aforementioned indicators provide us with information about Solana’s long-term market prospects. There are still millions of coins in circulation that can reach the market at any time.