In 2021, Solana (SOL) skilled substantial progress as a result of advocacy of Sam Bankman-Fried (SBF), a outstanding 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 enticing options, together with a scalable and developer-friendly community, different Ethereum (ETH) rivals possess these qualities as nicely. Regardless of this, Solana has managed to tell apart itself and garner the next stage of recognition.
The influence 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, shedding 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 yr, Solana’s blockchain had not demonstrated noteworthy progress by way of switch and cost 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 one of the vital overvalued networks aimed on the decentralized utility market, as indicated by a examine cited by Twitter profile Solana Day by day.
Overvalued Solana
The metric used to evaluate the correlation between Solana’s market value and its worth is MC/TVL, which stands for Market Capitalization divided by Complete Worth Locked. This metric is usually used to judge the monetary efficiency and viability of decentralized finance (DeFi) tasks.
It goals to match 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 value 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 doubtless that Solana could expertise some correction within the close to future, which is widespread given its current excessive valuation. Nevertheless, curiosity in cryptocurrencies continues to develop, as evidenced by the growing variety of energetic wallets interacting with decentralized exchanges this yr.
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 robust potential, may place Solana as a big participant within the decentralized trade, particularly if it may maintain tempo with its competitors, together with Ethereum’s rivals and Layer 2 tasks.
