Why is Solana price up this week?

Solana (SOL) price is up 40% this week to hit a new 2023 high of around $58.

This is Solana’s best weekly performance since January 2023. Many factors contributed to the gains, including an overall uptrend in the cryptocurrency market led by Bitcoin ETF euphoria and overall growing risk appetite.

Why is Solana price up this weekSolana (SOL) weekly price chart. Source: TradingView

Fear of an FTX dump fails to shake Solana bulls

Solana’s surge coincides with FTX’s bankruptcy estate selling between 250,000 and 750,000 SOL tokens daily over the past two weeks.

The Delaware bankruptcy court approved the sale of 55.75 million SOL tokens in September 2023. The limited impact of these sales, as some tokens are either vested or locked, and a weekly sales limit of $100 million, have turned initial fears into investor enthusiasm.

For example, according to CoinShares, funds focused on Solana, one of the barometers measuring institutional inflows in the SOL market, recorded $10.80 million in inflows in the week ended November 3.

1699747472 62 Why is Solana price up this weekInstitutional net flows across crypto funds. Source: CoinShares

Bitcoin ETF euphoria is one of the main reasons behind the overall bullish trend in cryptocurrency prices, led by Bitcoin’s surge towards $38,000. However, Solana has been the best performer in the last 30 days.

1699747473 9 Why is Solana price up this weekTop cryptos 7-day and 30-day performance. Source: Messari

Open interest in Solana is increasing in parallel with the funding rate

Solana futures open interest reached a significant level of around $772 million on November 11, the highest level since November 2021, when SOL price hit its record high of $260. High open interest indicates greater interest and potentially greater liquidity in the market.​

1699747475 160 Why is Solana price up this weekOpen Interest for Solana Futures. Source: Coinglass

Meanwhile, Solana’s rising OI comes with increasing funding rates, a fee paid every eight hours from one side of the perpetual contracts to the other. A positive funding rate usually means that long positions (buyers) are dominating the market, that is, they are paying short positions (sellers).

Earlier this week, SOL’s funding rate increased to 0.035% per eight hours. This funding rate represents a weekly cost of 0.735% for leveraged long positions, indicating strong bullish sentiment in the market.

1699747477 456 Why is Solana price up this weekSolana’s OI-weighted funding rate. Source: Coinglass

Rising OI and funding rate together suggest greater investor appetite for leveraged long positions.

To put it simply, most derivatives traders expect the SOL price rally to continue.

SOL price technical breakout

Solana’s gains this week appear to be part of a bullish breakout move. Notably, SOL price broke the horizontal trendline resistance of its ascending triangle channel two weeks ago.

1699747479 667 Why is Solana price up this weekWeekly SOL/USD price chart. Source: TradingView

If the reversal of the ascending triangle bottom occurs, the upside target for SOL price before year-end is around $90, a 50% increase from current price levels.

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However, bears will pin their hopes on the weekly relative strength indicator (RSI), which is now at its most overbought level since September 2021.

1699747481 595 Why is Solana price up this weekWeekly SOL/USD price chart. Source: TradingView

Therefore, the risk of a correction is high, with a correction towards the upper trendline of the triangle near the $30 level being considered.

This article does not contain any investment advice or recommendations. Every investment and trading activity involves risks and readers should conduct their own research when making their decision.