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Why is SOL so strong? Let's talk about when SOL is expected to rise.

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The strong performance of SOL is not only due to its leading technology, booming ecosystem, and capital self-rescue, but also factors such as faith, consensus, asset creation, MEME leader BONK going mainstream, new narrative Depin, and locked chip structu

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Original author: Chain Research Society

Editor's note: Recently, the Solana ecosystem has been gaining momentum. Regarding Solana's popularity, the crypto KOL Chain Research Society has published his unique perspective on X. BlockBeats has compiled the full text as follows:

Why is SOL so dominant and technologically ahead? Is it due to the explosive growth of its ecosystem or capital self-rescue? You may have heard too much about these views recently. I will share something different that may subvert your perception. At the end of the article, I will also discuss when SOL is expected to rise, which is something you need to pay attention to if you hold it.

There are three main points to be discussed one by one.

1. Faith is earned through falling, consensus is earned through rising.

2. Asset creation is key, MEME leader BONK breaks out and new narrative Depin

3. There is a large amount of locked positions and high concentration in the chip structure, and FTX cannot handle bankruptcy in the short term without selling pressure.

Why is faith something that is learned through falling, while consensus is something that is gained through rising?

Compare the bull and bear markets that ETH has experienced, and you will understand. In the last bull market, ETH performed exceptionally well, rising nearly 60 times from its 2018 low. However, before that, compared to the 2017 high, ETH fell from 1440 to 81.79, a whopping 94% drop. Similarly, SOL fell from 259.9 to 8, a 97% drop, triggering massive selling behavior when market confidence was strongly impacted, almost wiping out everyone's accounts and starting over. This is not only experienced by ETH and SOL, but BTC has also experienced several drops of more than 90%, clearing all floating chips and stabilizing holders. As prices rise, the effect of creating assets to make money continuously attracts external buying, and people will pay attention to the changes brought about by the fundamentals. There are two types of people who drive price increases: one is those who already hold and continue to increase their positions, and the other is potential buyers who will buy at support levels or in uptrends. When everyone who wants to buy in the market has bought and held for a long time, it will enter a sideways trend until the next key event.

Why is asset creation key?

Both of ETH's bull markets have experienced asset expansion, ICO and DeFi fever, locking up most of the liquidity. SOL is also a BONK that has completed the journey of a thousand cups. In addition, the introduction of the Depin concept expands the circle to acquire new users and create new assets. The ability of a public chain to win is not determined by how advanced its technology is or how perfect its ecosystem is, but by its profitability and new narrative. Due to the low efficiency of Gas capital flow and the large number of believers (those who should buy have already bought), as well as the stable chip structure of the pos mechanism, ETH needs to wait for the next key event, such as a significant reduction in Gas or the introduction of new funds through ETFs. Due to its large number of believers and sufficient potential buying power, its explosive power will also be very strong after the key event is triggered, so don't rush to sing its praises.

Why is a large amount of lock-up in the chip structure also a necessary condition?

The market generally believes that the more evenly distributed the chip structure is, the better, and that high concentration of chips is a bad thing. In fact, the opposite is true. You should know that every individual participating in market transactions is like you. The more evenly distributed the chip structure is, the more difficult it is to rise in practice because there are more factors to consider. The factors that determine the price increase are not the distribution of chips that have already purchased the underlying assets, but the potential buying pressure. There are two types of potential buyers: one is those who already hold and continue to increase their positions, and the other is those who will buy at support levels or in upward trends. Under the stable situation of holders, they form the upward trend of prices. Similarly, taking ETH as an example, in the last round, there were also a large number of locked chips. ETH2.0 was locked and could only be withdrawn after the upgrade was completed. Grayscale's large-scale buying only entered and did not exit, and a large number of locked chips in DeFi almost locked up all floating chips, so ETH could have a maximum increase of 60 times. Without the lock-up of these floating chips, the rise would definitely encounter huge pressure. Speaking of SOL, FTX and Alameda wallets collectively hold about 55.8 million SOL, accounting for 13% of the total circulation. This is exactly the same as what ETH experienced in the past. However, after the SOL in FTX and Alameda wallets is restored to circulation, it may no longer be strong, which is similar to the situation of ETH after the Shanghai upgrade when funds can be withdrawn.