Crypto News

Why did the price of Solana increase this week?

Solana (SOL) price soared 40% this week to set a new 2023 high at around $58.

This is Solana’s best weekly performance since January 2023. Many factors contributed to the gains, including a general upward trend in the cryptocurrency market led by Bitcoin ETF euphoria and a growing appetite for risk in general.

Solana (SOL) Weekly Price Chart. Source: TradingView

FTX dumping fears fail to shake Solana bulls

Solana’s rise coincides with the daily sale of 250,000 to 750,000 SOL tokens by the FTX bankruptcy estate over the past two weeks.

The Delaware Bankruptcy Court approved the sale of 55.75 million SOL tokens in September 2023. The limited impact of these sales, due to some tokens being vested or locked, and a weekly sale limit of 100 million dollars, transformed initial fears into investor enthusiasm.

For example, funds focused on Solana, one of the barometers for assessing institutional flows in the SOL market, saw inflows worth $10.80 million in the week ending 3 November, according to CoinShares.

Net flows from institutions pass through crypto funds. Source: CoinShares

Bitcoin ETF euphoria is one of the main reasons for the overall upward trend in cryptocurrency prices, led by Bitcoin’s rise towards $38,000. Solana, however, has been the best performer over the past 30 days.

Best crypto performances over 7 and 30 days. Source: Messari

Solana Open Interest Appears Alongside Funding Rate

Solana futures open interest reached a significant level of around $772 million on November 11, the highest since November 2021, when SOL price reached its all-time high of $260. High open interest levels indicate greater interest and potentially greater liquidity in the market.​

Solana futures open interest. Source: Coinglass

Meanwhile, the increase in Solana’s OI coincides with the increase in funding rates, fees paid by one part of the perpetual contracts to the other every 8 hours. A positive funding rate generally means that long positions (buyers) dominate the market, i.e. they pay out short positions (sellers).

Earlier this week, SOL’s funding rate increased to 0.035% every eight hours. This funding rate represents a weekly cost of 0.735% for leveraged long positions, suggesting strong bullish sentiment in the market.

Financing rate weighted by Solana OI. Source: Coinglass

The combined rise in OI and funding rate suggests a higher appetite for leveraged long positions among investors.

Simply put, most derivatives traders expect the SOL price rally to continue.

Technical breakdown of the SOL price

Solana’s gains this week appear as part of a bullish breakout move. Notably, SOL price broke above the horizontal trendline resistance of its ascending triangular channel two weeks ago.

SOL/USD weekly price chart. Source: TradingView

If the reversal of the ascending triangle bottom occurs, the SOL price upside target before the end of the year is around $90, up 50% from current price levels.

Related: Is This Another Season? Altcoin 30-day performance and flash total market cap bullish

Bears will, however, pin their hopes on the weekly Relative Strength Indicator (RSI), which is now at its highest overbought level since September 2021.

SOL/USD weekly price chart. Source: TradingView

Therefore, the risk of correction is high, with a correction towards the upper trendline of the triangle near $30 on the table.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research before making a decision.