Will Solana replace Ethereum's leading position?

Solana’s native token, SOL, rose 13.8% on Dec. 20, topping $82 for the first time since May 2022. A 33.5% gain over the past two weeks has caused SOL’s market cap to surpass XRP for the first time, making SOL the fourth-largest cryptocurrency excluding stablecoins.

Will Solana replace Ethereum's leading position?

Notably, some analysts are now questioning whether Ethereum can maintain its lead, given that the Solana network offers cheaper and faster transactions.

Trader Evanss6’s post on X (formerly Twitter) explains that Solana’s emphasis on mobile device accessibility is exactly what crypto projects need to attract new users who don’t care “whether the blockchain is decentralized enough and its underlying assets are non-sovereign currency competitors.” In essence, Solana’s user experience surpasses that of its competitors, especially for the launch of tokens and non-fungible tokens (NFTs), regardless of whether the project requires high processing power or simply benefits from low transaction costs.

Several factors have come together to drive this price increase, ranging from increased network activity to the immediate success of Solana’s SPL token launch. However, a more comprehensive analysis is needed to determine whether current valuations are justified and whether a rally above $100 is truly possible.

The current rally in SOL prices is supported in part by an airdrop frenzy that caused Solana’s Saga phone to completely sell out and trade at a premium on the secondary market.

Solana gained attention on December 7 when major centralized exchanges listed the newly launched SPL token, JITO, a Jito Liquid Stake Protocol token inspired by Ethereum’s Lido. Jito’s airdrop generated impressive profits within the first few hours of trading, with its market cap exceeding $300 million within the first few hours of trading. The successful debut on Coinbase and Binance has fueled demand for other airdrops and token launches on the Solana network.

As for Solana’s Saga phone, a turning point occurred when the Coinbase exchange listed the memecoin BONK on December 14. Each phone received 30 million BONK, which exceeded the product’s $599 price tag. Interestingly, even though Solana’s founder mentioned that the phone project might be on the decline just two weeks ago, other projects have joined the party.

SOL’s rise is supported by increased DApp activity

SOL’s recent rise has extended beyond memecoins, as evidenced by the Solana network’s growth in decentralized applications (DApps). Just three weeks ago, on November 29, Solana’s total locked value (TVL) was only $654 million, accounting for only 1.4% of the market share. According to DefiLlama, this figure has now grown to $1.28 billion, an increase of 96%.

The surge in staking on the Solana network is accompanied by an increase in activity on its decentralized applications.

Top blockchains by number of DApps in the past 7 days. Source: DappRadar

Notably, Solana’s network volume growth outpaced that of its main competitors. Likewise, the number of unique active addresses interacting with Solana’s DApps grew to an impressive 875,250, while most competing blockchains saw declines over the same seven-day period.

One could argue that Solana’s recent surge in activity is largely due to anticipation of upcoming airdrops and token launches, including Bonkwifhat (BIF), Ribbit (RBT), Jupiter (JUP), Meow Coin (MEOW), Phantom, Kamino, Drift, and others. However, by attracting more users and growing TVL, the Solana network is solidifying its position and attracting promising projects that can further establish its place in the DApp industry.

For example, leading hardware wallet provider Trezor announced support for Solana and its SPL token on Dec. 20. Additionally, Binance Research released an optimistic report on parallel computing on the same day, which improves blockchain throughput “by more efficiently utilizing computing resources.” The report specifically cited Solana as an example of parallel computing.

Essentially, the potential for SOL to rise to $100 seems feasible, considering that Solana’s network activity growth appears to be sustainable and not solely dependent on a few airdrops and token issuances.