Behind Solana's Strong Performance: In-depth Analysis of Belief, Asset Creation, and Chip Structure

Recently, the strong performance of Solana (SOL) has attracted wide attention from the market. This article will explore the driving forces behind the rise of SOL from three unique perspectives and analyze its future trends.

Faith arises from downtrends, consensus is generated in uptrends

Comparing the historical trend of Ethereum (ETH), we can find some interesting similarities. ETH performed exceptionally well in the last bull market, rising nearly 60 times from the low in 2018. However, prior to that, ETH fell from a high of $1440 in 2017 to $81.79, a decline of 94%. Similarly, SOL fell from $259.9 to $8, a decline of 97%.

Such extreme market fluctuations often trigger massive sell-offs, nearly emptying the accounts of all investors. This phenomenon has not only occurred with ETH and Solana; Bitcoin has also experienced declines of over 90% multiple times. These drastic market adjustments actually serve to filter out holders, leaving behind the most steadfast believers.

As prices begin to rebound, new assets are created, the profit-making effect gradually becomes apparent, and external funds start to flow in. At this point, investors will truly pay attention to changes in the project's fundamentals. The price increase is mainly driven by two types of investors: those who already have positions and are continuously increasing their holdings, and new investors who buy at support levels or during an upward trend. When all potential buyers in the market have entered and chosen to hold long-term, the market often enters a sideways consolidation until the next major event occurs.

The Core Role of Asset Creation

Both bull markets of Ethereum were accompanied by asset expansion, namely the ICO boom and the DeFi boom, which locked in a large amount of liquidity. SOL has also experienced a similar process, such as the explosive growth of BONK and the introduction of the Depin concept, both of which help attract new users and create new assets.

The success of a public chain does not solely depend on the advancement of its technology or the completeness of its ecosystem; more importantly, it lies in its ability to create a profit-making effect and new narratives. In contrast, ETH's high Gas fees have resulted in low capital flow efficiency, coupled with a large number of believers already in the market, and the chip structure under the PoS mechanism tending to stabilize. Currently, it may need to wait for the next significant event (such as a substantial decrease in Gas fees or ETF approval) to attract new funds. However, due to ETH's large group of believers and sufficient potential buying power, once a key event is triggered, its explosive potential could be astonishing.

The Significance of Centralized Chip Structure

The market generally believes that a more even distribution of chips is better, while a highly concentrated distribution is seen as a negative factor. However, the reality may be quite the opposite. The more dispersed the chip structure, the more factors participate in the market game, which may actually hinder the price from rising.

The key to determining price trends lies in potential buying pressure, rather than the distribution of chips held by existing holders. With stable positions among holders, new buying pressure is more likely to drive prices up. Taking ETH as an example, during the last bull market, factors such as ETH2.0 staking, significant purchases by institutional investors, and DeFi locking of assets collectively locked in a large amount of liquidity, creating the conditions for ETH to achieve an increase of up to 60 times.

For SOL, FTX and Alameda wallets collectively hold about 55.8 million SOL, accounting for 13% of the total circulating supply. This situation is highly similar to what ETH once experienced. However, it is important to note that once this portion of SOL is restored to circulation, it may impact its strong performance, similar to the situation ETH faced after the Shanghai upgrade when funds became withdrawable.

Overall, the strong performance of SOL involves multiple complex factors, including the rebuilding of market confidence, the creation of new assets, and a unique chip structure. Investors should take these factors into account when making decisions and closely monitor market dynamics.