According to Cointelegraph: The total value locked (TVL) on the Solana network has surged to its highest level since October 2022, sparking interest among traders and investors in the potential for SOL's price to break through resistance and reach new highs. Despite this positive indicator, SOL has struggled to surpass the $150 resistance level since mid-August. The critical question remains whether the strength in Solana's network metrics is enough to propel its price toward the $190 mark, especially in light of recent developments that have tempered investor enthusiasm.
Diminished Enthusiasm Due to Solana Spot ETF Prospects
One significant factor contributing to the muted performance of SOL is the recent decision by Cboe Global Markets to remove Solana spot exchange-traded fund (ETF) applications from its website. This move has led to speculation that the United States Securities and Exchange Commission (SEC) may have informally rejected these ETF proposals, aligning with SEC Chair Gary Gensler's previously stated position on digital assets.
With the likelihood of approval for a Solana ETF appearing slim under the current SEC administration, optimism has waned, dampening the potential impact of Solana's network growth on SOL's price. Some market participants, including finance lawyer Scott Johnsson and Bloomberg's senior ETF analyst Eric Balchunas, believe that only a significant political shift, such as a change in the SEC's leadership following a potential Trump victory, could revive hopes for a Solana spot ETF.
The Need for a New Narrative
Crypto trader and investor CoinMamba suggests that Solana's current appeal may be fading, especially as Ethereum's transaction fees have dropped to around $1, attracting users back to Ethereum and other competing blockchains. CoinMamba argues that for SOL's price to gain momentum, the Solana network needs to find a new narrative or capitalize on unique decentralized applications (DApps) that offer a competitive advantage.
However, it's worth noting that despite these challenges, Solana has seen positive developments, such as the launch of PayPal USD (PYUSD), a stablecoin on the Solana network, which reached $620 million in issuance within just three months. Additionally, Solana continues to attract significant investment, with projects like Colosseum and Decentralized Autonomous Wireless Network (DAWN) securing substantial funding to drive ecosystem growth.
TVL Growth vs. User Activity
While the growth in Solana's TVL is a positive sign, it does not necessarily equate to increased user activity or higher SOL prices. The TVL on Solana's DApps reached 34.9 million SOL as of August 22, marking a 13.7% increase from the previous month. This level of TVL growth indicates continued interest and confidence in the Solana network, but it may not be enough to fuel a significant short-term price rally.
Despite the increase in TVL, user activity on Solana's top DApps has been mixed, with half of the top applications experiencing a decline in user numbers over the past 30 days. This discrepancy highlights the challenge of translating network growth into sustained price gains for SOL. For SOL to reach the $190 target, Solana must not only maintain its TVL growth but also boost user engagement and explore new use cases that set it apart from competitors.
In conclusion, while Solana's network metrics show promise, the factors limiting SOL's price growth suggest that a breakout above $150 and a move toward $190 may require more than just an increase in TVL. The network needs to address the challenges posed by diminished ETF prospects, find new narratives to drive demand, and ensure that TVL growth is accompanied by robust user activity.
