An In-Depth Analysis of the Reasons Behind the Rise of Solana

Recently, the strong performance of Solana (SOL) has attracted widespread attention in the market. This article will explore the deeper reasons behind the rise of SOL from several unique perspectives and provide an outlook on its future trends.

Fall out of faith, rise out of consensus

Throughout the history of the cryptocurrency market, we can observe a pattern: deep corrections often filter out true believers, while continuous rises can consolidate a broader consensus. Ethereum (ETH) performed exceptionally well in the last bull market, rising nearly 60 times from its low in 2018. However, before that, ETH had dropped from $1440 to $81.79, a decline of 94%. In comparison, SOL fell from $259.9 to $8, a drop of 97%.

Such extreme market conditions often trigger large-scale sell-offs, as if resetting all investors' accounts to zero. Not only ETH and SOL, but Bitcoin has also experienced declines of over 90% multiple times. This process cleans out floating chips, leaving mostly steadfast holders. Subsequently, as prices recover and new assets are continually created, external funds begin to enter the market, and attention will return to the fundamentals of the projects.

The Importance of Asset Creation

The success of a public chain does not depend on how advanced the technology is or how perfect the ecosystem is, but rather on whether it can continuously create profitable effects and new narratives. The explosion of BONK in the SOL ecosystem and the introduction of the Depin concept are a reflection of this strategy. These emerging assets not only attract new users but also create new value anchors.

In contrast, ETH has low capital flow efficiency due to high Gas fees, coupled with the fact that many believers have already accumulated positions, and the chip structure is stabilizing under the PoS mechanism. It may require waiting for the next key event (such as a significant decrease in Gas fees or ETF approval) to trigger a new surge. However, considering ETH's large base of believers, once a key event is triggered, its explosive potential should not be underestimated.

The Impact of Chip Structure

Contrary to common perception, a high concentration of chips is not entirely disadvantageous. The key factor determining price increases is the potential buying power, rather than the distribution of chips held by current holders. Potential buying power mainly comes from two types of people: first, existing holders continuously increasing their positions, and second, new investors buying at support levels or in an upward trend.

Taking ETH as an example, in the last bull market, factors such as the staking of ETH 2.0, large purchases by certain investment funds with only inflows and no outflows, and a significant amount of locked assets in DeFi projects nearly locked up all floating chips. This is an important reason why ETH was able to achieve a maximum increase of 60 times.

For SOL, certain bankrupt entity wallets hold approximately 55.8 million SOL, accounting for 13% of the total circulation. This situation is similar to what ETH has experienced in the past. However, once this portion of SOL is restored to circulation, its strong position may be challenged, akin to the situation ETH faced after the Shanghai upgrade allowing funds to be withdrawn.

Future Outlook

The future trend of SOL will depend on the combined effects of multiple factors. In the short term, due to a large number of chips still being locked, along with the continuous emergence of new assets in the ecosystem, SOL may continue to remain strong. However, investors need to be wary of potential risks, especially the pressure that may arise when a large number of locked chips re-enter circulation.

In the long run, whether SOL can continue to attract new users, create new value anchors, and make continuous progress in technology and ecosystem building will be key factors determining its future development. At the same time, external factors such as the regulatory environment of the overall cryptocurrency market and the macroeconomic situation will also have a significant impact on SOL's performance.