Solana's native token SOL (SOL) saw a decrease of 8.5% between July 2 and July 3, retesting the $140 support level. This correction wiped out gains from the previous three days, which had peaked at $154.80.
As SOL approached $142, it recovered some of its losses, marking a 23% decline over three months, while the broader cryptocurrency market lost 9% in the same timeframe. This has led traders to wonder whether SOL’s bearish trend could push its price below the $140 mark.
A spot Ether ETF launch could be a double-edged sword
Cryptocurrency investors are increasingly shifting their focus to Ether (ETH) as the leading decentralized application platform is anticipated to launch its own spot exchange-traded fund (ETF) in the United States. Some analysts believe that the spot Ethereum instrument could gather $15 billion in its first 18 months. In contrast, a Solana spot ETF is still in the preliminary stages and seems somewhat unlikely in the near term.
Additionally, traders’ morale took a hit as Bitcoin (BTC) retested the $60,000 support on July 3, now showing a 15% loss in four weeks. This trend is largely attributed to deteriorating macroeconomic conditions, particularly in the job market. Meanwhile, demand for cryptocurrencies has weakened as the stock market reached new all-time highs on July 3, spurred by Tesla's reported quarterly deliveries that surpassed analysts’ expectations.
However, there is a silver lining for SOL investors as its valuation is likely to benefit from the impending approval of the spot Ethereum ETF. Due to the absence of fundamental metrics for estimating cryptocurrency valuations, investors often resort to relative analysis. This explains why the 40-day correlation between the two assets currently stands at 89%. Although this indicator does not guarantee that the price relationship will persist, it has historically been fairly positive.
In essence, if Ether’s market cap surges from the current $400 billion to $560 billion, traders will evaluate Solana's network in terms of activity, user engagement, and fees to determine how much higher SOL’s market cap, currently at $66 billion, should be. Unless Ethereum's market share increases significantly, SOL’s price is likely to benefit from this event. Therefore, analyzing DApps activity trends is crucial to understand SOL’s potential upside.
Solana’s market share continues to increase
Fees are a critical metric for any blockchain network or DApp, as the revenue generated can be used for security and to provide yields that stimulate deposits, whether for liquidity provision or incentivizing token lockup. Essentially, fees are a vital measure of health and sustainability for cryptocurrencies.
Solana accumulated $49.3 million in fees over 30 days, while its top DApps—Raydium, Jito, and Pump—generated a combined total of $83.7 million. For comparison, Ethereum’s fees amounted to $131.8 million in the same period, with its leading DApps, Lido, Uniswap, and AAVE, bringing in $160.9 million. This gives Ethereum a 2.7x advantage in direct fees and a 2.2x advantage when considering the top three DApps.
Ethereum's dominance in decentralized exchange (DEX) activity, particularly in terms of total value locked (TVL), is clear. Nonetheless, the relatively high fees associated with the Ethereum network create opportunities for competitors like Solana to vie for higher volume.
Related: Ethereum DApp volume surges by 83%, but there could be a catch
Note that Solana ranks second with $7.2 billion in weekly DEX volumes, only 27% less than the leader, Ethereum. Furthermore, while Ethereum’s TVL decreased by 4% over the past seven days, Solana’s deposits saw a 3% increase during the same timeframe. This trend appears to favor Solana, particularly given that Ethereum trades at six times higher in terms of market cap.
Some critics suggest that Solana’s numbers should not be taken at face value due to the relatively low cost of inflating transactions and active addresses compared to Ethereum. However, when considering the growth of the Solana network, it becomes difficult to justify any widening of the valuation gap relative to Ethereum, currently at six times. At least in terms of DApps and on-chain activity, the odds support the strength of SOL’s $140 support level.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
