In recent weeks Solana (SOL) has been climbing the ranks of market cap and total value locked (TVL) among the top 10 protocols. The public blockchain has seen a noticeable gain in price along with the surge of DeFi and NFT projects being built on the chain, bringing it closer to the top five cryptocurrencies.
SOL, the native token of Solana, a public blockchain backed by Sam Bankman-Fried, founder of crypto exchange FTX, hit a record US$218.90 on October 25, according to TradingView. In the past week, Solana has gained 35 percent, mostly driven by DeFi and NFT projects.
Last week’s results have seen the total crypto market capitalisation pass the US$2.5 trillion mark, a new milestone for the cryptocurrency industry, with SOL flipping Ripple (XRP) to become the sixth-largest cryptocurrency by market cap.
SOL was a top performer over the last few months … [It’s] only natural for it to perform well during the next leg of the bull cycle.Ashwath Balakrishnan, research associate, Delphi Digital
Solana’s Major Increase in TVL
One of the main factors pushing this ride up was the surge of DeFi, DAO and NFT projects on the Solana blockchain. Funds have been streaming into the decentralised finance (DeFi) economy, enabling users to loan funds, earn interest, swap tokens and generally make their money work for them.
According to DeFi data provider Defi Llama, TVL in Solana reached an all-time high of approximately US$14 billion on October 25. TVL is the US dollar value of the cryptocurrency committed to DeFi protocols.
A handful of projects on the Solana blockchain have brought in billions for the chain, significantly increasing its TVL. The dominant project is Saber, an automated market maker (AMM) protocol that enables Solana users and applications to trade between stable pairs of assets and earns yields by providing liquidity, which has raked in US$2.05 billion.
Another four protocols – Radium (US$1.91 billion), Sunny (US$1.73 billion), Serum (US$1.69 billion) and Marinade Finance (US$1.63 billion) – have locked in over US$5 billion for the public blockchain.
Money Flows From Bitcoin to Other Layer 1 Platforms
Bitcoin (BTC) reached its new all-time high of US$66,974.77 last week as money flows from it to other Layer 1 solutions, resulting in an altcoin season. Layer 1 is the base layer, the main network on which a cryptocurrency such as bitcoin runs.
According to TradingView, the bitcoin dominance ratio, which measures bitcoin’s market capitalisation relative to the total crypto market cap, dropped to as low as 44.62 percent last weekend before returning to roughly 45 percent on October 25. That decrease in the dominance ratio indicated that at least part of bitcoin’s momentum had shifted to other tokens.
When bitcoin momentum slows down, Layer 1 tokens often perform better than any category […] Layer 1s have been the best-performing tokens since the June bottom – and, quite frankly, they boast the highest year-to-date returns, too.Delphi Digital market report
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