What's behind Solana's rapid price increase?

Within just three days, Solana's share price rose from about USD 150 (March 13) to a peak of USD 197 (March 16, 11:40 a.m.). After a brief respite, Solana took another run-up on the evening of March 18 and broke through the USD 200 mark. Solana's share price currently stands at USD 207 (as of March 18, 11:30 a.m.). This raises the question of what is behind this relative strength of SOL.

Catching up in full swing

While Bitcoin has already broken its old all-time high from the cryptohype year of 2021 and Ethereum was not far behind it a few days ago, the situation is different for Solana. Compared to other cryptocurrencies, the coin is still far from its all-time high of around USD 260.

No wonder, as Solana has suffered more severe setbacks than any of the other top currencies. At the height of the bear market and the low point in the case of FTX, even the viability of the blockchain was questioned. After all, the blockchain project was closely tied to Alameda Research, FTX's investment arm.

This fear no longer exists, but the coin still has more catching up to do than other blockchain projects that have not faced such a loss of trust. Therefore, the current catch-up potential is high.

The Solana projects reinforce each other

Solana's own ecosystem also continues to grow rapidly, as evidenced by the SOL blockchain's increasing DeFi TVL. According to Dapp Radar has increased by about 15 percent over the past seven days. DApps volume on Solana is also growing faster than its competitors, up 37 percent in the past seven days. The exception is blockchain Avalanche, which is also experiencing tremendous growth.

Future airdrops on Solana could be one of the reasons for this sharp increase. Numerous airdrops are planned, from which layer 1 will benefit. Especially since many participants in airdrops are exchanging their coins for SOL. The more Solana airdrops there are and the larger they are, the more capital is created that can flow to the "parent chain." This true FOMO and associated activity creates strong support for the price. Larger current airdrops on Solana include Kamino Finance, Zeta Market and Parcl.

Dogwifhat and other memecoins

Solana is also benefiting from the current memecoin hype. The new superstar among memecoins, dogwifhat, at times managed to reach a market capitalization of more than US$3 billion.

Meanwhile, numerous copycat memecoins have surfaced that, like dogwifhat, are based on the SOL blockchain. Even the outdated Solana memecoin Bonk managed to gain more than 100 percent last month.

Ethereum's competitors play catch-up

Solana's ecosystem-lighthouse projects are also growing even faster than Solana itself - apart from memecoins. These include the Oracle and Chainlink counterparts Pyth Network and Jupiter. The race to overtake Ethereum is fueling many tokens.

Indeed, some investors are hoping for greater upside potential from the Solana ecosystem than from Ethereum coins. The bet is that Solana will outperform Ethereum in this bull run. The more this view prevails, the stronger Solana's relative performance against the Ethereum ecosystem is likely to be.

Technical development in full swing

Solana has also made good progress in technical development. For example, the Solana developer community is making efforts to enhance the smart contracts platform with so-called token extensions.

These make it possible to provide tokens with individualized functions or capabilities. These features can range from automated transaction fees and compliance checks to complex interaction mechanisms, as explained in detail in this article.

Disclaimer: This article represents the author's opinion only. It is not buy or sell advice.