Solana (SOL) price rally could fizzle out due to weak fundamentals

Solana’s (SOL) recent 250% rally to $25 has shocked many investors in the crypto market. At the same time, traders who had eyes on the negative funding rate for SOL in the futures market could have anticipated the bullish move ahead of others.

It’s because excessive negative funding rates, like the one in Solana displayed below, implies that the majority of traders are on the short side, providing an opportunity for buyers to run their stops.

SOL funding rate for perpetual swaps. Source: Coinglass

Regardless of the reason behind the price increase, if enough buyers are interested in joining the bullish move, it can turn into a medium-to-long-term bullish trend. However, Solana’s fundamental and market analysis shows weakness, which will more likely cause a steep correction in the altcoin.

Solana finds a worthy competitor in NFT space

Solana ranks second in terms of NFT trading across blockchain platforms. Ethereum commands the lion’s share of the total NFT trading volume with an 81.6% share. Solana has the second biggest pie with an 11.6% share, according to data from Delphi Digital.

However, the ecosystem received a setback when two of the largest projects in DeGods and y00ts decided to shift away from Solana. The departure of top-performing projects sets a bad precedent for product developers looking to launch NFTs. To date, Ethereum remains the go-to choice for big brands and community projects.

Share of NFT trading volume by blockchains from Dec. 4 to Jan. 4. Source: Delphi Digital

Moreover, Polygon has started gaining traction after forging key partnerships with brands like Reddit, Starbucks, and Meta. DeGods also chose Polygon over Solana after receiving a $3 million grant from Polygon Labs. Polygon’s business development team has been recognized as the best in business.

The usage data from Nansen for Polygon and Solana confirms the diversion where the number of active users on Polygon is spiking while Solana’s usage has been in a downtrend since mid-2022.

NFT traders per week on Polygon (left) and Solana…..

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