Solana rallies 8% as crypto markets recover — Is there room for more SOL upside?

Solana's native token, SOL (SOL), rose 8% on March 19 as investors turned to riskier assets ahead of US Federal Reserve Chair Jerome Powell's remarks. While interest rates are expected to stay unchanged, analysts anticipate a softer inflation outlook for 2025. Meanwhile, key onchain and derivatives metrics for Solana suggest further upside for SOL price.

The cryptocurrency market mirrored intraday movements in the US stock market, suggesting SOL's gains were not driven by industry-specific news, such as reports that the US Securities and Exchange Commission may drop its lawsuit against Ripple after clinging to it for four years.

Russell 2000 small-cap index futures (left) vs. SOL/USD (right). Source: TradingView / Cointelegraph

On March 19, the Russell 2000 index futures, tracking US-listed small-cap companies, surged to their highest level in twelve days. Despite a broader slowdown in decentralized application (DApp) activity, Solana stands out. 

Solana’s onchain volumes dropped 47% over two weeks, but similar declines were seen across Ethereum, Arbitrum, Tron, and Avalanche, highlighting industry-wide trends rather than Solana-specific issues. The Solana network’s total value locked (TVL), a measure of deposits, hit its highest level since July 2022, supporting SOL's bullish momentum.

Solana total value locked (TVL), SOL. Source: DefiLlama

On March 17, Solana's TVL climbed to 53.2 million SOL, marking a 10% increase from the previous month. By comparison, BNB Chain's TVL rose 6% in BNB terms, while Tron's deposits fell 8% in TRX terms over the same period. Despite weaker activity in decentralized applications (DApps), Solana continued to attract a steady flow of deposits, showcasing its resilience.

Solana saw strong momentum, driven by Bybit Staking, which surged 51% in deposits since Feb. 17, and Drift, a perpetual trading platform, with a 36% TVL increase. Restaking app Fragmentic also recorded a 65% rise in SOL deposits over 30 days. In nominal terms, Solana secured its second-place position in TVL at $6.8 billion, ahead of BNB Chain’s $5.4 billion.

Despite the market downturn, several Solana DApps remain among the top 10 in fees, outperforming larger competitors like Uniswap and Ethereum’s leading staking solutions.

Ranking by 7-day fees, USD. Source: DefiLlama

Solana’s memecoin launchpad Pump.fun, decentralized exchange Jupiter, automated market maker and liquidity provider Meteora, and staking platform Jito are among the leaders in fees. More notably, Solana’s weekly base layer fees have surpassed Ethereum’s, which holds the top position with $53.3 billion in TVL.

Despite a 27% decline in SOL's price over 30 days, demand for leveraged positions remains balanced between longs (buyers) and shorts (sellers), as indicated by the futures funding rate.

SOL futures 8-hour funding rate. Source: CoinGlass

Periods of high demand for bearish bets typically push the 8-hour perpetual futures funding rate to -0.02%, which equals 1.8% per month. When the rate turns negative, shorts are the ones paying to maintain their positions. The opposite occurs when traders are optimistic about SOL’s price, causing the funding rate to rise above 0.02%.

The recent price weakness was not enough to instill confidence in bears, at least not to the extent of adding leveraged positions. One reason for this can be explained by the reduced growth in SOL supply going forward, similar to inflation. A total of 2.72 million SOL will be unlocked in April, but only 0.79 million are expected for May and June.

Ultimately, SOL is well-positioned to reclaim the $170 level last seen on March 3, given the resilience in deposits, the lack of leverage demand from bears, and the reduced supply increase in the coming months.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.