2 Reasons Why Solana (SOL) Is Rallying

The solid price performance of Solana was not the most expected thing by the majority of cryptocurrency market participants. Considering the enormous pressure the asset faced after the FTX implosion and a massive amount of coins in free circulation, we should not really see the price movement we are seeing now. However, there are some reasons behind it.

Users are sleeping on SOL

All of the aforementioned factors did not go un noticed as the majority of traders and investors were passing over Solana, not considering it as a potential investment, according to funding rates and trading volumes we saw previously.

🕕 The #FOMC meeting on interest rates is 2 hours away at 19:00 UTC. So far, markets have been rallying in anticipation of good news for the markets. Prices are headlined by #Solana rebounding to $14.80. Social dominance & funding rate staying low is key. https://t.co/uPDzqHqFb3 pic.twitter.com/SpU6gJgYzH

— Santiment (@santimentfeed) December 14, 2022

However, the lack of social recognition and low funding rates are usually continuation indicators, as no selling pressure is provided by mid- or long-term Solana holders. The situation will change as social indicators around SOL rally upward, reflecting a return of potential sellers to the market.

Funding rates at “usual” levels

Low funding rates are a sign of low liquidity and, quite often, descending volatility on the market. On the other side, abnormally high funding rates increase the potential of an upcoming volatility spike in either direction. In the case of Solana, rates are at a moderate level, enough to bring volatility back to the market, without causing too much shakiness that would cause a rapid price reversal.

Unfortunately, both funding rates and social recognition of SOL are temporary indicators that will rise to extreme values in case of a rally continuation on the market. But at the same time, neither of the aforementioned indicators provide us with any information about the long-term prospect of Solana on the market. There are still millions of coins in circulation that might hit the market on any given day.