In an event that has the seasoned traders and crypto enthusiasts catching wind, Solana (SOL) seems to have emerged as a top performer in the crypto market.
Just today, large-scale investors or “whales” have been seen accumulating Solana in large amounts. Believe it or not, the once 10th ranked cryptocurrency by market cap has jumped to 7th place. According to Copernicus, a YouTube channel that doesn’t shy away from reveling in the latest rumors, Solana is about to announce something big and that is why it is accumulating fast.
Whale Activity Shows Confidence in Solana
The recent uptick in whale activity is important because these investors tend to have a big influence on how others feel about the market. Only two hours ago, a huge crypto player pulled a mind-blowing 54,544 $SOL (around $7.46 million worth) out of Binance, one of the planet’s biggest crypto exchanges. This wasn’t the same old move as the last time we checked in; this was a fresh move, and it seems like this whale is not looking to make any moves in the same direction that most crypto traders were making when 2022 started.
Shortly thereafter, a different whale made an even bigger splash by taking out 41,096 $SOL (roughly $6.96 million) from Binance and staking the coins. For the uninitiated, staking is when you lock up your coins in exchange for some kind of reward. It’s like putting them in a very safe time deposit. This whale is not only accumulating but seems to be in it for the long haul, if not forever. And if the Solana network undergoes a second retrenchment like the one it experienced last September, the whale is still in a very good position. They could very well be holding Solana’s future in their pocket.
For a large number of people in the crypto industry, the large withdrawals and staking events recently seen in Solana are a sign that the industry’s top players believe Solana’s price has hit or is nearing a bottom. These appear to be steps taken by some of Solana’s biggest backers that could pay off nicely for them if, in the future, the price of Solana increases.
Declining On-Chain Metrics: What Does It Mean for $SOL?
Although the activity of whales may present a picture of confidence, other on-chain metrics are showing a more cautious aspect for Solana. One of the most striking changes is the 53% decline in the number of new addresses being created on Solana this month. This sharp drop in new address creation is a clear signal that user adoption and participation are slowing, and that is a vital metric for the health of any blockchain network.
A drastic decrease in new addresses is reflecting the same pattern as last summer, when Solana experienced another bumpy stretch. Back then, the network got hit with a ton of activity drops, and some folks even started to wonder if the ecosystem itself was kind of in trouble. And now, it feels like we’re hearing similar echoes again. All of this is making the stability of Solana over the long haul feel a little less certain.
The current decline in new address creation might not equate to the demise of Solana. It is, after all, experiencing the address decline at the same time that not much in the way of net new crypto users seems to be happening. Panicky investors often sell off their assets at a loss, and these non-holders (at least until the market goes back up) tend to be counted kind of anyway as part of the address decline. But, hey, history is full of instances when what looks like a down-and-out situation for an around-anywhere asset becomes a recovery moment after what looks to be stabilization.
Could $SOL Be Reaching a Bottom?
The recent whale accumulation and the decline in new user activity present a mixed picture for Solana’s future. On one hand, the whaling community’s actions suggest that there may still be confidence in the network’s potential, despite recent declines in on-chain activity. Solana’s current price may be creating an buy signal, if not a pure accumulation signal, for the wailing community. After all, whales make large moves based on long-term predictions, and if they are buying or accumulating $SOL, that’s worth noting.
Conversely, a fall in fresh addresses is alarming. An otherwise vibrant blockchain ecosystem usually witnesses unrelenting growth in user adoption, and a new user base that is down 53% year over year cannot be considered anything other than a worrisome trend. That said, it’s also worth keeping in mind that the unpredictability of market cycles in the cryptocurrency space means that even this period of seeming stagnation could be followed by a sharp rebound.
Additionally, Solana has confronted some substantial hurdles over the last year, with network outages and increasing competition from other blockchain platforms. Still, Solana has been working hard to address those problems and also seems to be making progress. Its lightning speed and almost-limitless scalability sure still seem to make it a strong candidate for hosting dApps and DeFi projects.
Market Outlook: What’s Next for Solana?
Although the dip in new accounts this month and the latest activity by Solana whales suggest a questionable future, it’s necessary to step back and look at the larger narrative.
Solana has fast become a genuine blockchain alternative in the eyes of many developers, and it has done so in a short period of time. It remains reliable and draws in projects and capital despite the temporary unwanted attention from the problem-solving sort.
To sustain long-term growth, Solana will need to resolve the problems that are affecting user adoption and carry on improving the reliability of its network. Yet, the combination of whale accumulation and the possible bottoming out of on-chain metrics may mean that Solana is somehow setting itself up for a turnaround.
For traders, the next weeks will be critical in deciding whether Solana can build on the recent accumulation by large investors and embark on a path to recovery or whether it will continue to plummet as its on-chain activity dwindles. No matter what direction the immediate market takes, the future of Solana is likely to depend on its ability to satisfy the big investors now buying up large amounts of Solana while at the same time achieving a user growth rate that likely requires it to satisfy a lot of small users who can’t be ignored.
Disclosure: This is not trading or investment advice. Always do your research before buying any Metaverse crypto coins.