Solana surpasses Polygon: will the price of the crypto go up?

According to data from CryptoSlam, Solana has surpassed Polygon in the past 30 days to become the second-largest blockchain after Ethereum in terms of NFT trading volumes. 

Ethereum is unmatched, with more than $500 million traded in NFTs in the past month, but Solana has risen to nearly $60 million. Polygon fell to 15 million, closely followed by ImmutableX with 14 million. 

Cardano also entered the top 5, with 7 million, followed by Flow with 4.8 million. Only sixth was BNB Chain with just over 4 million. 

It is worth noting that Solana’s boom is very recent, so much so that in the last 24 hours alone it has seen NFT on-chain transactions worth a total of ten times that of ImmutableX. Polygon’s collapse is also recent, so much so that in the last 24 hours it has been less than $200,000, or one-twentieth of Solana. 

Even though Polygon enables fast and cheap NFT exchanges, it suffers greatly from competition from Ethereum, especially now that transactions on Ethereum are not at all expensive. 

Solana also offers fast and very cheap transactions, and suffers less from Ethereum competition. On top of that, it has not experienced any technical problems similar to those that have occurred in recent weeks. 

The price of SOL

SOL is Solana’s native cryptocurrency, and is therefore the utility token with which fees must be paid on every transaction on Solana’s blockchain. 

After being firmly in the top 10 of the largest market capitalization cryptocurrencies for many months, it has now slipped to 16th place, partly because of the very technical problems that have generated some discouragement in recent months. 

However, the recent boom in NFT trading has not caused any positive impact on the price. 

The fact is that trading volumes have not increased on an absolute level, but in relation to other blockchains. In other words, there have been no purchases of more SOL in order to pay fees on a larger number of transactions, but simply the reduction in NFT trading volumes has been less than that of other blockchains. 

It is worth bearing in mind that NFTs are one of the main features for which Solana was designed, whereas for Ethereum and Polygon, for example, they are only a secondary feature, albeit a widely used one. 

From 16 December, in fact, the price of SOL has dropped. 

In about ten days it has lost more than 20% of its value, falling from $14 to $11. 

Indeed, in the last 24 hours it has made new annual lows below $11.2. 

It is enough to think that before the collapse of the Terra/Luna ecosystem in May, its market price was still close to $100, while already in June it had fallen below $30. 

In particular, it was the failure of FTX that sent the price plummeting to new annual lows, as it collapsed from over $35 to under $13 from 6 to 9 November. Since then it has entered a relatively long phase of downward lateralization from which it has not yet recovered. 

Solana (SOL): the possible rise in the crypto’s price

The fact that the holding of NFT trading volume has not been able to positively influence the price trend could mean that, should such volumes increase, the price may be poised to rise again. 

However, a few points must be raised in this regard in order to understand how realistically likely such a scenario is. 

First, it is worth mentioning that the NFT market is currently going through a downturn that is not suggesting an increase in trading volumes in the short term. So it may still take some time before such a condition occurs. 

Second, the crypto market as a whole is not living a good time at all either. While there have not been any further collapses across the board since the FTX fiasco, for now there is no sign on the horizon in the short term of the triggering of a new bull run, or at least a significant rebound. 

It is worth noting that SOL’s loss in value during this 2022 has been significant, with -93% since the beginning of the year, and -88% from May to the present. Compared to the all-time high of almost $260 in November 2021, the accumulated loss has been almost 96%. 

However, if we take the pre-bubble price as a reference point, that is, in November 2020, the current price is still five times higher. 

Therefore in theory there would still be room for further decline, and only when the selling pressure has subsided can we begin to hope for an upturn. 

Then again, the potential for an eventual rebound seems to be appealing, because following such a decline, in case an upward climb begins, it could also be significant. 

Given that NFTs are the main use of Solana to date, in the absence of a recovery of the NFT market it is difficult to imagine a strong rebound of SOL. 

The NFT market

According to CryptoSlam, during 2022 the dollar volume of NFT trades literally collapsed. However, it is worth mentioning that most NFTs are sold in exchange for cryptocurrencies, and in particular ETH, so this figure is heavily impacted by the loss in dollar value of ETH. 

When analyzing the data on the number of individual buyers, however, the decline is confirmed. 

After peaking at over 120,000 unique buyers on 20 January this year, they had already dropped below 90,000 by the beginning of May. By early July they had plummeted to 40,000, while December saw annual daily lows below 30,000. 

In other words, over the course of 2022, the number of daily NFT buyers has shrunk fourfold, and on the chart there is no sign of a possible rebound in the short term. In part because last year, at the height of the bull run, there were low peaks of less than 16,000 unique daily buyers, so there seems to be the potential for a continuation of the current decline. 

In light of this, it is difficult to imagine that the price of SOL will rebound any time soon, although in theory such a possibility is not completely non-existent.