As we delve deeper into the potential of Solana (SOL) for the upcoming 2024 alt rally, it’s crucial to understand the driving forces behind its anticipated spot ETF. In this second part of our review, we will explore two pivotal factors: decentralization and demand. These elements not only position Solana favorably among its peers but also raise the question—will an ETF pump Solana’s price? By examining Solana’s performance in decentralization metrics and market demand indicators, we aim to provide a comprehensive outlook on its future. Stay with us as we uncover whether Solana is poised for a significant price surge.

Two More Factors for Solana’s Spot ETF

Decentralization: The Backbone of Solana

The first factor to consider is decentralization. Decentralization is a critical aspect of any blockchain project, and for Solana, it includes several key metrics:

• Nakamoto Coefficient: This metric measures the number of validators required to disrupt the network. Solana scores well here, indicating a robust and secure network.
• Staking Requirements: Solana’s staking requirements are designed to ensure network security while being accessible to a wide range of participants.
• CCData Governance Rating: Solana’s governance structure is highly rated, reflecting its commitment to decentralization and community involvement.

Solana’s performance in these areas gives it a decentralization score of 0.4. When compared to other projects, Solana ranks #2, just behind Ethereum, showcasing its strong position in the market.

Demand: The Driving Force Behind Solana

The next crucial factor is demand. Demand for Solana is measured through various market indicators:

• Market Indicators: These include trading volume, liquidity, and market sentiment, all of which are favorable for Solana.
• Assets Under Management (AUM): Solana’s AUM is growing, indicating increasing investor interest.
• Activity Metrics: High activity on the Solana network, including transaction volume and active addresses, further underscores its demand.

With a demand score of 0.7, Solana again ranks #2 behind Ethereum. This strong demand positions Solana as a leading candidate for a spot ETF.

Impact on $SOL From a Spot ETF

Historical Context: BTC’s ETF Listing

To understand the potential impact of a Solana ETF, we can look at Bitcoin’s (BTC) own ETF listing. When BTC’s spot ETF was listed, its price surged from $27,000 to $63,000, a 2.3x increase. While it’s optimistic to expect similar results for Solana, it’s essential to consider the differences in market cap and investor base.

Potential Scenarios for $SOL

Based on BTC’s experience, we can outline three scenarios for Solana’s ETF impact:

• Bear Case: If the $SOL ETF’s volume is 2% of BTC’s, we could see a 1.4x increase in $SOL’s price.
• Base Case: With a 5% volume of BTC’s ETF, $SOL could experience a 3.4x increase.
• Bull Case: In the most optimistic scenario, if $SOL’s ETF volume reaches 14% of BTC’s, we could see an 8.9x surge in $SOL’s price.

These scenarios take into account Solana’s smaller market cap, providing a realistic range of potential outcomes.

Current Price Action

SOL/USDT Analysis

The SOL/USDT chart is currently bullish. The $119 support level has been revisited and held multiple times, indicating strong buyer interest. With positive market sentiment, SOL could retest the $204 resistance level. For short-term traders, $120 is a good entry point.

SOL/ETH Analysis

The SOL/ETH chart is even more promising. The price action suggests a strong range, with potential for a pump to the 0.056 level. This bullish trend indicates that Solana is well-positioned against Ethereum in the near term.

Should We Buy SOL?

Portfolio Considerations

If you already hold Ethereum (EVM L1 or EVM L2) and SUI (another non-EVM L1), there may be no immediate need to rush into Solana. However, if your portfolio lacks exposure to Layer 1 (L1) blockchains, Solana is an excellent pick. The downside risk is minimal, and the upside potential is significant.

Entry Points

For those looking to invest, $120 is a good entry point. Any price below $100 is ideal for dollar-cost averaging (DCA) to build a substantial position. Given the bullish outlook for a $SOL ETF, now could be an opportune time to invest, while always managing your risk appropriately.

Summary

In conclusion, Solana’s strong performance in decentralization and demand metrics positions it as a leading candidate for a spot ETF. While the exact impact on $SOL’s price remains uncertain, historical data from BTC’s ETF listing provides a range of potential outcomes. With bullish price action and favorable entry points, Solana presents a compelling investment opportunity for 2024. However, as with all investments, it’s crucial to manage your risk and conduct thorough due diligence.

The author does not own or have any interest in the securities discussed in the article.