Analysis Of The Dynamics Of The Solana Coin (Sol)

Analysis Of The Dynamics Of The Solana Coin (Sol)

Analysis Of The Dynamics Of The Solana Coin (Sol)

How Solana works

SOL is the native token of the Solana blockchain. The main advantages of this blockchain are fast transactions and low fees.

Software engineer Anatoly Yakovenko founded Solana in 2017, and after three years of development, the Sol platform and token were launched.

Most cryptocurrencies use a so-called “consensus mechanism” to tie all the components together and agree on which transactions are valid and which are not. To achieve this goal, Solana uses proof-of-stake, a widespread consensus mechanism that is supposed to be more sustainable than Bitcoin’s proof-of-work method.

Validators tasked with making sure transactions are valid are selected based on the number of SOL tokens they own. 

About the SOL token

Solana is an inflationary cryptocurrency without a hard limit on the total number of tokens. The initial annual inflation rate is 8%, and the disinflation rate is 15%. The decline occurs annually until inflation reaches 1.5%, which becomes a fixed long-term rate.

Inflation Chart (Solana Foundation)

37% of the initial distribution of SOL tokens went to investors, and 25% was divided between the Solana team and Solana Foundation. This non-profit organization leads the development of cryptocurrency, and 38% was sent to the Solana Foundation community fund reserve.

SOL Application

SOL is used in two ways:

  • Paying Transaction Fees: While the fees on the Solana network are much lower than those of other cryptocurrencies, it still charges fees for sending transactions or running smart contracts.
  • Staking: Like many other blockchains, Solana is secured using a consensus mechanism. People who want to help secure cryptocurrency by becoming a validator can stake some of their SOLs or lock them up to secure the network and make money from it.

SOL exchange rate dynamics

Since the launch of SOL in March 2020, the price of SOL has fluctuated between $0.50 and $1.50 throughout the year. SOL became one of the highest earning assets amid the cryptocurrency bull run in 2021 as it hit $55.91 by May 2021. Although it dropped to $23.49 in July 2021, the price of SOL rose again in the year’s second half and reached an all-time high of $258.93 in November 2021.

BTC and SOL exchange rate chart for the last year

BTC and SOL exchange rate chart for the last six months

The images above show a comparative chart of Solana and Bitcoin exchange rates. As we can see, the dynamics of these crypto assets are very similar. According to Top Crypto Coin Price, the correlation indicator for the last year between Solana and Bitcoin has reached 0.8804, and over the past six months, it has even reached 0.9515. Thus, we can say that Bitcoin is a “guide” for Solana – a positive change in the Bitcoin rate leads to an increase in the Solana rate, and vice versa – a fall in Bitcoin often negatively affects the Solana rate. However, according to numerous forecasts, soon, we may expect an alt season – a period when growth ratesaltcoin quotes are ahead of the bitcoin index. It is worth noting that these are only the opinions of some individuals and not a financial recommendations.

Key events that influenced the value of Solana


1) Solana Leads Cryptocurrency Return (8/17/2021)

Cryptocurrencies are generally making a comeback, led by Solana, Cardano, and Litecoin, which have made impressive strides in pushing their market value past the $2 trillion mark.

2) Solana fights for price recovery after shutdown (09/22/2021)

The Solana network, which had skyrocketed in popularity, was down for 17 hours, and prices have since lost a fifth of their value.

3) Solana receives institutional support (10/12/2021)

Cryptocurrency exchange FTX US is fully launching its NFT marketplace, which will feature Solana-based NFTs as the only supported network.

4) New horizons for the Solana blockchain (02.11.2021)

Solana receives a vote of confidence from the privacy-enabled Brave Browser.

5) Transaction Speed Scandal (21/13/2022)

For several days, the Solana community was in turmoil after a sudden drop in transaction rates.

6) Network instability (02/01/2022)

Solana’s network struggles to function after suffering yet another bout of instability.

7) Solana rides the NFT wave (30.03.2022)

After several months of rumors, the largest NFT marketplace, OpenSea, finally has the opportunity to sell Sol NFT.

8) Solana is ahead of Ethereum (04/28/2022)

After the successful NFT sale of Okay Bears, more than $18 million was raised, and the attention of most users, along with liquidity, is increasingly moving to the Solana market from the Ethereum market.

9) Breakthrough Magic Eden (20.05.2022) 

Solana’s Magic Eden NFT marketplace is starting to overtake Ethereum’s OpenSea marketplace in terms of volume and popularity.

10) Phone from Solana (06/23/2022)

Anatoly Yakovenko, CEO of Solana Labs, presented a new Saga smartphone based on Android in New York. His team is developing a smartphone designed explicitly for web3, already with built-in NFT marketplaces and decentralized exchanges.

11) Large-scale exploit in the Solana network (08/04/2022)

Over 8,000 hot wallets on the Solana network have been hacked. It is estimated that about $6,000,000 was stolen by the attackers.

Results

It is worth saying that the Solana blockchain is actively developing and does not stand still. In this regard, his token’s price reached $260 (ATH) with an initial price of less than $1. It is worth noting that the cost of Solana is highly dependent on the cost of Bitcoin – there is a dependence with a probability of 90%. However, due to the rapid activity of the developers, the coin can either shoot or fall sharply, periodically deviating from the Bitcoin rate.

The main disadvantage of the network, due to which the token rate can go down, are periodic failures in the blockchain and a drop in transaction speed. And also, as experience has shown, Solana can be subject to hacker attacks.

As for the positive aspects, here it is worth highlighting the strong influence of the NFT market, where Solana occupies a leading position, as well as the constant desire of developers to establish relationships with other ecosystems and offer the market a new unique project.

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