Solana Overtakes Ethereum in DeFi Volumes –Will SOL Price Hit $120? 

Key Insights:

• Solana (SOL) price closed January 2024 around the $94 area, down 15% for the month.
• DeFiLlama data shows Solana’s DeFi trading volume dominance has increased from 16% to 26% between Dec 31 and Jan 31 flipping Arbitrum, and encroaching Ethreum market share in the process. 
• The rising spate of defi activity on Solana L-1 blockchain could accelerate market demand for SOL. 

Solana (SOL) price broke above the $100 barrier on Jan 30, amid rising DeFi volumes and positive sentiment surrounding the upcoming Jupiter (JUP) airdrop. 

Solana Price Dipped 12% After Fed Chief Jerome Powell Statement

On Jan 30, Solana price briefly broke the $100 barrier for the first time in 2024. But, on Feb 1, barely 48 hours later, crypto prices dipped after Fed Chief Jerome Powel made controversial statements hinting at postponing rate cuts beyond March 2024 as widely predicted. 

“Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that. But that’s to be seen,” Jerome Powell (Jan 31, 2024)

Jerome Powell’s statements came in the aftermath of a scheduled Federal Open Market Committee (FOMC) meeting  on Jan 31. It triggered a significant pullback across risk assets including stocks and the crypto markets.

TradingView’s TOTAL3 chart below presents the cumulative value of all listed crypto assets excluding Bitcoin (BTC) and Ethereum (ETH). 

It shows that the cumulative value of the altcoin markets shrunk by 5.3% between Jan 30 and Feb 1. Meanwhile, Solana price dipped 12.5% from its Jan 30 peak of $106 to a local bottom of around $93.7 on Feb 1. 

This illustrates that bearish headwinds from Powell’s statement has impacted Solana price disproportionately, with its 12.5% dip exceeding the overall altcoin market average by more than 7%. 

Without a distinct bearish catalyst, an asset’s price sinking faster than the sector average can be a key signal that it may be undervalued or oversold.

Potentially, this outsized volatility could set the stage for SOL price to make a major leg-up when the industry sentiment flips bullish again.

Solana DeFi Market Share Crossed 26% in January 

Solana DeFi trading volume trends for January 2024, signaling that the 12.3% SOL price downtrend this week is likely not driven by a commensurate deterioration in its fundamental network utility. 

DeFillama’s DEXs trading volume metric tracks and compares the nominal value of transactions involving crypto assets across various decentralized exchanges. This essentially reflects the liquidity and investors activity within a decentralized financial ecosystem by blockchain. As seen in the chart below, Solana’s dominance within the DeFi sector increased from 16.5% to 26.9% between Dec 31 to Jan 31. 

 

A closer look at the chart further reveals that Solana has witnessed 15.2% increase in trading volumes in the past weekly timeframe, it leapfrogged Arbitrum (ARB) and Ethereum (ETH) to claim 1st place. 

An increase in trading volume on a blockchain network is a tell-tale sign that native tokens are in high demand. If this uptrend in Solana network participation and Defi activity persists, it’s only a matter of time before SOL price enters a rebound phase. 

Positive speculations surrounding the Jupiter (JUP) token airdrop could further exacerbate the Solana DeFi activity in the days ahead, potentially adding another catalyst for a potential SOL price breakout toward $120. 

SOL Price Forecast: The Bulls Could Target $120 

From an on-chain perspective, SOL price appears to be oversold, relative to the average. The rising defi volumes and the upcoming Jupiter (JUP) airdrop are key catalysts that could propel SOL price up the chart in February. 

Given that Solana price recently broke above $105, the bulls could set their sights higher and attempt a retest of the $120 area during the next rally. 

The Bollinger bands technical indicator also affirms this stance. When an assets’ price breaks above critical averages, it signals a growing bullish momentum. And with SOL currently trading at $96 at press time on Feb 1, it has moved above the 20-day simple moving average price of $93. 

This alignment suggest that Solana price is now on a recovery phase, shaking off bearish impacts of Powell’s rate cut postponement comments. 

However, the upper Bollinger band shows that the bears could mount a significant resistance at the $103 area. A decisive breakout above that resistance sell-wall could open the doors to a potential $120 retest. 

On the flipside, the bears can force a reversal below $80, they could summarily invalidate this optimistic prediction. But as depicted above, the bulls will likely regroup at the lower Bollinger band to defend the $83 support.