Solana's SOL Drops 4% But Traders Eye $200 Rally

Solana's native token, SOL, experienced a 4% decline between April 29 and April 30, failing to sustain the $150 level. However, traders' confidence in the token has been growing, as the $140 support level has remained intact for a week, a feat not achieved in over two months. This stability has led traders to reconsider the possibility of a SOL rally above $200.

On April 30, the open interest in SOL futures reached 40.5 million SOL, marking a 5% increase from the previous month and nearing its all-time high. In dollar terms, this represents $5.75 billion in futures positions, ranking third in the cryptocurrency market and over 50% higher than the demand for XRP derivatives. This strong adoption of SOL derivatives points to growing institutional interest in the token.

While increased demand for SOL futures is often seen as a sign of rising optimism, it does not necessarily indicate a bullish outlook. The funding rate for perpetual contracts shows more demand for bearish positions, with the last period of moderate optimism ending on April 25 after a failed attempt to break above $156. The lack of bullish leveraged positions may be partly due to the 43% price gain SOL saw in the three weeks from April 8 to April 29.

A $200 target for SOL may seem ambitious, but the token was trading near $195 in mid-February, even after decentralized application volumes had dropped by 80% from their January peak. Solana has faced criticism for its heavy reliance on memecoins, but there is more to the network than just speculation on new tokens. Solana ranks second in total value locked (TVL), with $9.5 billion in deposits, including liquid staking, collateralized loans, automated yield platforms, and synthetic derivatives. Several Solana decentralized applications are among the top fee earners, with Meteora collecting $19.1 million in seven days, followed by Pump-fun with $18.6 million and Juto with $14.6 million.

Since April 14, Solana’s decentralized exchanges have seen nearly 90% higher trading volumes than Ethereum’s, even when including the entire Ethereum layer-2 ecosystem. Solana led the past week with $21.6 billion in decentralized exchange activity. Positive highlights from the Solana network include an 87% weekly increase in Raydium’s volumes and a 58% rise in Meteora activity. So, even if demand for bullish leveraged positions stays flat, SOL’s price could eventually reflect the improved onchain metrics.

From a trading perspective, SOL could also benefit from the possible approval of a spot Solana ETF in the United States. The final deadline for the US Securities and Exchange Commission’s decision is Oct. 10, with a 90% chance of approval. Still, SOL might rally above $200 before this event, as the network is well-positioned to attract new retail investors.