In 2021, Solana (SOL) skilled substantial progress as a result of advocacy of Sam Bankman-Fried (SBF), a distinguished determine within the blockchain trade. This entrepreneur’s efforts successfully elevated the altcoin’s visibility, contributing to its success.
Whereas Solana has a number of engaging options, together with a scalable and developer-friendly community, different Ethereum (ETH) opponents possess these qualities as properly. Regardless of this, Solana has managed to tell apart itself and garner the next degree of recognition.
The impression of Sam Bankman-Fried (SBF) on Solana (SOL) was vital, to the extent that the altcoin was sometimes called “Sam’s cryptocurrency.” Sadly, when SBF’s fortunes took a turn in 2022, the SOL token skilled a dramatic drop, dropping 60% of its market capitalization inside per week. This decline was additional exacerbated by the suspension of tasks on the Solana community.
Moreover, by the top of the 12 months, Solana’s blockchain had not demonstrated noteworthy progress when it comes to switch and fee volumes or asset storage, resulting in a lack of competitiveness in comparison with networks like BNB Chain and Polygon (MATIC).
Given these challenges in its historical past, Solana has been criticized as some of the overvalued networks aimed on the decentralized utility market, as indicated by a research cited by Twitter profile Solana Each day.
Overvalued Solana
The metric used to evaluate the correlation between Solana’s market worth and its worth is MC/TVL, which stands for Market Capitalization divided by Complete Worth Locked. This metric is often used to guage the monetary efficiency and viability of decentralized finance (DeFi) tasks.
It goals to check the full worth of belongings on the platform with the full worth of belongings locked as collateral for decentralized monetary protocols. A better MC/TVL ratio implies the next diploma of utilization and belief within the DeFi platform. When a community’s MC/TVL exceeds 1.0, it suggests an overvaluation of the community, which can lead to a worth correction.
On the time of writing, Solana has a market capitalization of $8.8 billion. Nevertheless, knowledge from DeFiLlama signifies that the Complete Worth Locked (TVL) on the Solana blockchain is $264.85 million. This ends in a MC/TVL ratio of 17.5, indicating a possible market correction for the altcoin.
However is that this trigger for concern?
It’s probably that Solana could expertise some correction within the close to future, which is widespread given its latest excessive valuation. Nevertheless, curiosity in cryptocurrencies continues to develop, as evidenced by the growing variety of lively wallets interacting with decentralized exchanges this 12 months.
Moreover, Solana’s community has demonstrated reliability up till now, with no downtime and quick transactions, even with a low TVL and restricted NFT exercise. This stability, mixed with its sturdy potential, might place Solana as a big participant within the decentralized trade, particularly if it will possibly maintain tempo with its competitors, together with Ethereum’s opponents and Layer 2 tasks.
