Solana's DeFi TVL Raises! Will This Cause a Bullish Momentum for SOL?

Solana (SOL) has been making waves in the crypto space, and it’s no surprise given its recent performance. In the past few days, the price of SOL has rallied nearly 25%, jumping from $147 on May 6 to $183 by May 10.

This surge was partially fueled by Bitcoin’s impressive breakout above $100,000, propelling the altcoin market into motion. But what’s next for Solana? Can this price surge continue?

In this article, we’ll dive into the factors driving Solana’s momentum and explore whether this will lead to a long-term bullish trend for SOL.

DeFi TVL Surge: A Key Driver of Solana’s Growth

One of the most significant factors behind Solana’s recent rise is its increasing Total Value Locked (TVL) in DeFi. Solana now ranks as the second-largest blockchain by TVL, with $10.9 billion locked, surpassing Ethereum Layer-2s such as Arbitrum and Avalanche.

This growth is a testament to the rising popularity of Solana’s decentralized finance ecosystem. The DeFi platforms built on Solana are gaining traction. For instance, Raydium, a decentralized exchange (DEX), saw a remarkable 78% increase in TVL over the past 30 days.

Meanwhile, Jito’s liquid staking solution and Marinade Finance posted increases of 41% and 56%, respectively. These developments indicate that more users are engaging with Solana's DeFi sector, which is a strong indicator of potential future growth for the price of SOL.

As more value locks into the network, it’s evident that Solana’s ecosystem is strengthening, which could pave the way for a continued rise in SOL’s price.

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Fee Revenues: A Sign of Strong Network Activity

While high transaction fees may not always be welcomed, in Solana’s case, they reflect a thriving and active network. Over the past 30 days, Solana generated $43.3 million in base layer fees, which is more than Ethereum’s $24.9 million for the same period, only trailing Tron’s $51.9 million.

This spike in fee revenues further reinforces the idea that Solana’s network is experiencing strong decentralized application (DApp) usage.

Growing transaction fees, paired with higher on-chain activity, provide substantial demand for SOL, as users must pay transaction fees in SOL tokens. This creates a supply-demand dynamic that could continue to push the price of SOL higher, especially as Solana’s staking rate remains strong.

Over 65% of the SOL supply is staked, which limits the amount of tokens circulating in the market, thereby increasing scarcity and supporting upward price pressure.

The Bullish Outlook for Solana’s Price

Given the rising TVL and the increased fee revenues, it’s no wonder that some analysts have set their sights on the $200 mark for SOL shortly. However, despite these promising fundamentals, traders remain cautious.

According to Laevitas data, Solana’s perpetual futures funding rate is at 8%, indicating neutral sentiment in the market.

While this is not overwhelmingly bullish, it does suggest that the sentiment could shift quickly, especially if a potential Solana spot ETF approval or other major developments in the Solana ecosystem occur.

Additionally, tokenizing traditional assets on Solana could draw institutional interest, which would further fuel demand for SOL.

Challenges: Will Ethereum Outperform Solana?

Despite the bullish outlook for Solana, not everyone is convinced that SOL will continue to outpace other cryptocurrencies in the coming months. Analysts like CryptoBullet have pointed out that Ethereum may soon outperform Solana, citing a potential breakdown in the SOL/ETH weekly chart.

If Ethereum starts to outperform Solana, we could see a shift in capital flows back toward Ethereum, particularly if Ethereum’s narrative of an ETF approval continues to gain traction.

While Solana’s fundamentals remain strong, Ethereum’s massive network and the continued development of Ethereum Layer-2 solutions could pose a competitive threat to Solana’s growth.

READ ALSO: SEC Delays Solana ETF Decision from Grayscale! Sentiment Mixes

What’s Next for Solana?

With its growing DeFi TVL, impressive fee revenues, and high staking rate, Solana is positioned for continued growth. However, it faces competitive pressure from Ethereum and other blockchain networks.

Solana’s success in breaking the $200 barrier may be achievable in the short term, but the question remains whether it can maintain its momentum amid Ethereum’s resurgence.

Conclusion

Solana’s DeFi ecosystem is thriving, and the growing TVL and fee revenues point to a strong bullish case for SOL.

However, Ethereum’s presence in the market could potentially slow down Solana’s momentum if its ecosystem continues to outperform. As always, traders should remain cautious, but there’s no doubt that Solana has the potential to become a key player in the crypto space.

Want to take advantage of the Solana price movement? Start trading SOL today on Bitrue Exchange or read the latest crypto news on Bitrue Blog to stay informed about the latest market trends.

FAQs

1. What is Total Value Locked (TVL) in DeFi?

TVL refers to the total amount of assets locked in DeFi protocols. It’s an important metric for understanding the size and health of a blockchain’s DeFi ecosystem. In Solana’s case, its TVL has been steadily increasing, which is a good sign for SOL’s price potential.

2. How does Solana’s fee revenue compare to Ethereum?

Solana’s fee revenue has been higher than Ethereum’s over the last 30 days, with Solana generating $43.3 million compared to Ethereum’s $24.9 million. This suggests higher on-chain activity on Solana, which can contribute to higher demand for SOL.

3. What could prevent Solana from maintaining its bullish momentum?

The main threat to Solana’s growth could be Ethereum’s resurgence. If Ethereum outperforms Solana in the coming months, it could shift investor capital away from Solana, affecting SOL’s price.