Solana posted a 20% increase last week, but can SOL keep up?

Solana has seen an increase of more than 20% in the last week. This is what the on-chain data says regarding whether or not this is sustainable.

Solana trading volume has remained low despite rising prices

In its latest data release, on-chain analytics firm Santiment took a look at underlying Solana metrics to see what has been driving the latest rise in price.

The firm analyzed the “social volume” of the cryptocurrency for various social media platforms and found that the asset has seen a lot of interest on Reddit recently.

Here, social volume refers to a metric that measures the total number of unique posts or threads on a given social media platform that make at least one mention of SOL. This metric can tell us how much discussion the coin is currently receiving on the website in question.

Now, below is a graph showing the trend in Solana’s social volume across four major social media platforms: Telegram, Reddit, Twitter, and 4chan.

It seems that the metric value has been relatively low for most of these platforms | Source: Feeling

As shown in the chart above, Solana’s social volume on Reddit has seen a few spikes as the cryptocurrency has risen over the past week or so. The other platforms, however, have not observed as much discussion related to the asset.

There was also a notable increase in social volume on Reddit ahead of the coin’s 5% rise over the past 24 hours. This may imply that user interest in the platform could be partly helping drive the rise.

However, in terms of actual trade volume, SOL has continued to see subdued activity, despite growth.

Here is a chart showing the trend in this indicator:

The metric value has not been too high recently | Source: Feeling

Interestingly, the initial strong rise that Solana enjoyed was accompanied by strong volumes, but earlier this month, the value of the indicator noted some dip. Since this drop in volume, SOL has moved mostly sideways.

In general, for any price increase to be sustainable, high trading volumes are required. This is due to the fact that it takes the participation of a large number of traders to provide enough fuel for any price movement to continue.

Despite the strong growth that Solana has seen today, the trading volume that remains low would suggest that the broader market is not finding the rally interesting enough to make moves on the net. Naturally, if the rally has to continue for an extended period, volumes may need to return to the market.

There is also the fact that the SOL funding rates (a measure of the periodic fee that futures traders exchange with each other) on Binance and DyDx have turned quite positive recently.

Longs dominate the market | Source: Feeling

On the chart, it is visible that the earlier rise in the asset price may have been helped by shorting in the market, as funding rates had been very negative at the time.

With long contract holders being the majority force in the futures market now, the chances of a long contraction now being higher. In this case, if one occurs, the price would feel a bearish effect.