How Far Are We From Solana Summer 2.0? A Deep Dive with SolanaFM
You might have heard of the term ‘Solana Summer’ being thrown around the crypto community. It’s been the buzz word after what we’ve seen last year — Solana underwent a massive rally to prices over $250 in November 2021, more than 5 times its price of $44 in August 2021.
Word is going around that Solana Summer will make another appearance this year, especially with the momentous rise of NFT projects like Okay Bears and DeGods. In this report, we will elucidate the key factors giving rise to Solana Summer 1.0 and assess whether we could really see another Solana Summer this year.
What happened during Solana Summer 1.0?
In this report, we will set the timeline for Solana Summer 1.0 as the period from mid August 2021 to early November 2021.
Let’s begin by breaking down Solana Summer 1.0. What happened throughout the rally?
Growth of DeFi Ecosystem
Solana’s DeFi ecosystem held a Total Value Locked (TVL) of $1.63B on August 15. This value skyrocketed over 700% to $11.56B on November 6.
Solana’s open innovation approach proved to be an effective method to accelerate the growth of its DeFi ecosystem. Solana’s Ignition Hackathon held on October saw more than 200 submissions under the DeFi category and birthed several novel projects such as Katana, Atrix Protocol, 01 Protocol and Fluidity Money.
Growth of NFT Ecosystem
Solana’s NFT Ecosystem also showed remarkable growth throughout the period with the rise of top-tier NFT projects including Solana Monkey Business, Degenerate Apes and Aurory. Magic Eden’s transaction volume and user count accelerated faster than any of its competitors, resulting in the newly-launched marketplace capturing over 50% of the NFT market share.
Here are some statistics we can compare before and after Solana Summer 1.0.
We can see that the total number of NFTs minted daily had almost tripled and the NFT market cap grew almost 50%.
Growth of Solana’s Network
Apart from the growing NFT and DeFi ecosystem, the rapid growth of Solana’s network is also a motivating factor behind institutional interest. In Q2 2021, Solana Labs raised over $300M in a round led by A16z and Polychain Capital.
Here are some before-and-after statistics on Solana’s network.
Throughout Solana Summer 1.0, the total number of accounts and the total number of transactions (excluding vote transactions) saw 1900% and over 2460% growth respectively.
Can We See Solana Summer 2.0?
Onto the main question — How likely can we see Solana Summer 2.0 this year?
At its peak, Solana had a market cap of over $70B and a DeFi TVL of $11.56B.
Currently, Solana’s market cap is just below $17B with a DeFi TVL of $3.12B — a drop of 75% and 73% respectively.
In this case, we would need a liquidity injection of over $50B, with $8.4B flowing into the DeFi ecosystem for Solana to trade back at peak levels.
Let’s break this down more verbosely with a comparison of Week-on-Week (WoW) growth rates throughout Solana Summer 1.0 and at the time of writing. We will use figures from the NFT market to conduct this analysis.
Comparison of NFT Trading Volume (WoW)
This figure shows the comparison between the weekly NFT Trading Volume from 16 August to 10 October 2021 (during Solana Summer 1.0) with that of 17 April to 21 June 2022 (current).
Comparison of NFT Mints (WoW)
This figure shows the comparison between the weekly NFT mints from 16 August to 10 October 2021 (during Solana Summer 1.0) with that of 17 April to 21 June 2022 (current).
Based on trading volume and weekly mint count, we can see that a majority of the current WoW growth rates have yet to match the levels reached during Solana Summer 1.0.
It is also important to note that Solana Summer 1.0 was heavily influenced by the bull run in 2021, where other cryptocurrencies like Bitcoin and Ethereum saw 85% and 99% growth respectively. This current bear market could further hinder the possibility of Solana Summer 2.0.
On the bright side, however, we can see that the NFT ecosystem has achieved an impressive feat — We are currently trading more NFTs than during the peak of Solana Summer.
Solana’s NFT market cap during the peak of Solana Summer was $1.3B, while the current market cap is at $1.4B (at the time of writing). In addition to Magic Eden topping OpenSea in Daily Trading Volume, Solana projects like Trippin’ Ape Tribe, Okay Bears and DeGods have quickly become a few of the most valuable NFT projects in Solana.
Could we see an ‘NFT’ Summer, at least?
As it stands, Solana Summer 2.0 would be a bit of a stretch. However, if the NFT ecosystem continues to expand at this pace, we could see a price rally; albeit of a smaller scale. Let’s extrapolate some figures from Solana Summer 1.0 to get a rough estimate of how far we are from achieving an ‘NFT’ Summer this year.
Current Figures (May 2022)
NFT Market Cap: $1.4B
NFT Daily Trading Volume: $9M
Daily NFT Mints: ~100,000
Figures from Solana Summer 1.0 (Aug — Nov 2021)
Growth in Solana NFT Market Cap: 50%
Growth in Daily NFT Trading Volume: 850%
Growth in Daily NFT Mints: 265%
These figures ascertain that an ‘NFT’ Summer would see estimated values of $2.1B for the NFT market cap, $76.5M in daily NFT trading volume and approximately 265,000 NFT mints each day.
Food for Thought
The daily trading volume of Serum Protocol is currently at $37M, while the total NFT Daily Trading Volume is at $9M. Could the NFT ecosystem produce more than twice as much trading volume as the biggest DeFi protocol in Solana?
$700M of liquidity has to be injected into the NFT Ecosystem for its market cap to hit $2.1B. Top NFT projects like DeGods and Okay Bears currently have market caps of about $150M and $100M respectively. Could we see an increase in floor prices of existing projects, or will most of the additional liquidity be captured by new NFT projects?
Assuming an average number of 10,000 mints per project, about 27 NFT projects have to be produced each day. Could we soon discover the formula to continuously produce top-tier NFT projects in Solana?
The Bottom Line
Whether or not we see the another Solana Summer this year, the ecosystem will continue to grow with upgrades constantly being proposed to make the network more robust. Since January 2022, Solana has seen an average of over 150 new unique programs being constructed each month.
With the expansion of NFT and DeFi infrastructures, we can expect to see more use cases of NFT and DeFi protocols and a wider adoption of Solana. Take a look here to keep track of the latest updates on the Solana network.
Solana Labs release Github Page: https://github.com/solana-labs/solana/releases
SolanaFM Network Statistics: https://pro.solana.fm/statistics