Solana Hits Record vs. Ether, Outperforms Bitcoin as AI Memecoin Frenzy and Surging Revenues Fuel Rally
10/24/2024 03:36
Solana was the best-performing asset in the CoinDesk 20 Index through the week, advancing 11%, while BTC and ETH declined.
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Solana's SOL has outperformed ether (ETH) and bitcoin (BTC) as blockchain activity is booming on the network.
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The latest memecoin trend of artificial intelligence agents promoting and investing in tokens is mostly centered on Solana.
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Open interest for solana futures increased by almost 3 million SOL, or $506 million through the past four days.
While the broader crypto market has been consolidating following the quick runup from the early October lows, Solana {{SOL}} has been on a tear against the largest cryptocurrencies.
SOL is the best performing asset in the broad-market CoinDesk 20 Index through the past week with a 11% gain, while almost all other constituents lost value, bitcoin's {{BTC}} 2.5% decline and ether's {{ETH}} 3.5% drop among them.
The action has brought SOL to a new all-time record price against rival layer-1 network Ethereum's ether on Tuesday, surpassing the 0.064 level first hit in August, TradingView data shows.
Meanwhile, SOL has also shown relative strength against bitcoin, reaching its highest price versus BTC in more than two months.
The price action happened alongside resurgent speculative activity in memecoins, a big jump in network revenues and rising bullish bets on crypto derivatives markets.
Solana has greatly benefitted from the resurging speculative frenzy with memecoins, with most of the activity centered around Solana-based decentralized finance (DeFi) protocols. The latest trend, or fad, of artificial intelligence (AI) agents pumping memecoins is also predominantly based on the Solana network.
A primary example is the Goatseus Maximus (GOAT) token, which skyrocketed to over $600 million market capitalization from zero in only two weeks, with Marc Andreessen-funded AI bot known as Truth Terminal heavily promoting it on social media. The token was created on October 10 by an anonymous developer using Pump.fun and got endorsed by Truth Terminal.
"With that, a whole narrative was born from the intersection of AI, memecoins, and crypto," David Zimmerman, DeFi analyst at K33 Research, wrote in a Wednesday report. "AI memecoins have gained massive attention over the last two weeks, with many tokens reaching over $100 million market cap."
The memecoin frenzy drove blockchain activity on Solana to fresh highs. Network revenues from transaction fees surpassed $4 million per day on Tuesday nearing the records in March during the March crypto market peak, increasing by tenfold since early September lows, Token Terminal shows. Meanwhile, active users on the chain rose to record highs of over 8 million.
Higher revenues also dampen the token's inflation, with now over 15% of newly issued tokens are being destroyed, or burned, per Blockworks data.
Open interest on the SOL futures markets climbed to over 18 million SOL, or $3.09 billion, the highest amount in notional value since January 2023, CoinGlass shows. In the past four days alone, open interest has increased by almost 3 million SOL worth $506 million.
Open interest refers to unsettled futures bets or the total amount of funds allocated in open futures contracts. It is one of the best ways to determine whether new money is entering the market. It can be measured in a native token terms like solana {{SOL}} notional value. Native token is the preferred denominator as the notional value is influenced by the rise or fall of the asset's price. A spike in leverage can contribute to market volatility, and if prices start to move one way or the other, we could see a high amount of short or long liquidations.
Funding rates for perpetuals stand at 10% annualized, which measures the price longs have to pay to short traders to keep their perpetual futures position open, indicating that most of the bets are longs, anticipating prices climbing higher.