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Solana price staged a strong recovery after dropping to a low of $204 on Dec. 11, with signs pointing to a more sustained rebound.
Solana (SOL) rose to $227, bringing its market cap to over $107 billion. This recovery mirrored that of other cryptocurrencies, including Ripple (XRP) and Avalanche (AVAX). Here are the three reasons why the SOL price may soon jump to over $500.
Data shows that Solana is becoming increasingly scarce as the number of tokens on exchanges continues to decline. Nansen data indicates that the amount of SOL tokens on exchanges fell by 13% in the last seven days to 282.24 million.
This decline is likely driven by two factors. First, many investors are moving their coins to self-custody wallets. Second, a significant number of investors are staking their SOL tokens. According to StakingRewards, Solana’s staking ratio stands at 65%, higher than that of most coins like Ethereum (ETH), Polkadot (DOT), and Cosmos (ATOM).
Second, Solana may continue rising because of its role in the crypto industry. Data shows that protocols on the Solana network handled $32.46 billion in trading volume over the past seven days, surpassing Ethereum’s $25 billion.
In addition to its DEX dominance, Solana is gaining traction in other areas of the crypto industry, including gaming and decentralized public infrastructure. This growth is translating into financial gains, with the network collecting over $672 million in fees this year.
Solana price technicals suggest more gains are possible
Third, technicals suggest that Solana price has more gains to go. On the daily chart, the coin has formed a bullish flag pattern, which happens when an asset forms a long vertical line and a flag-like pattern. It is one of the most bullish patterns in the market.
Solana has also formed a break-and-retest pattern by falling to $210 on Tuesday. This was an important level since it was the highest swing in March this year. It is common for an asset to retest a key resistance or support level and then continue the uptrend.
On the weekly chart, SOL has also formed a cup-and-handle pattern with a depth of approximately 97%. By projecting 97% from the upper side of the cup at $260, the price could potentially rise to $511 in the long term.