Important Index Shows Altcoin Is One of Most Overvalued

In 2021, Solana (SOL) experienced significant growth with the endorsement of Blockchain industry luminary Sam Bankman-Fried (SBF). This entrepreneurial effort has effectively raised the profile of the altcoin and contributed to its success.

Solana has some compelling features, such as a scalable and developer-friendly network, but other Ethereum (ETH) competitors also possess these qualities. Nonetheless, Solana managed to distinguish itself and achieve a higher level of recognition.

Sam Bankman-Fried (SBF) had a great influence on Solana (SOL), and the altcoin was often referred to as Sams Cryptocurrency.Unfortunately for SBF Fate changed in 2022, the SOL token experienced a dramatic decline, losing 60% of its market cap within a week. This decline was exacerbated by the shutdown of projects on the Solana network.

Furthermore, by the end of the year, Solana’s blockchain had shown no notable progress in terms of transfer and payment volume or asset storage, making it uncompetitive compared to networks such as BNB Chain and Polygon (MATIC). rice field.

Given these challenges in its history, Solana has been criticized as one of the most overrated networks targeted at the decentralized application market. twitter Profile Solana Daily.

Overrated Solana

The metric used to assess the correlation between Solana’s market price and its value is MC/TVL. This is the market capitalization divided by the total locked value. This metric is commonly used to assess the financial performance and viability of decentralized finance (DeFi) projects.

It is intended to compare the total amount of assets on the platform with the total amount of assets locked as collateral in decentralized financial protocols. The higher the MC/TVL ratio, the more popular and trustworthy the DeFi platform is. His MC/TVL above 1.0 for the network suggests an overvaluation of the network and may result in a price correction.

At the time of writing, Solana has a market capitalization of $8.8 billion. However, according to DeFiLlama data, the total value (TVL) locked on the Solana blockchain is $264.85 million. This brings the MC/TVL ratio to 17.5, indicating a potential market correction for altcoins.

But is this cause for concern?

likely to Solana Given the high valuations these days, this is a common occurrence. However, interest in cryptocurrencies continues to grow as evidenced by the growing number of active wallets interacting with decentralized exchanges this year.

Additionally, Solana’s network has proven reliable so far with zero downtime and fast transactions, even with low TVL and limited NFT activity. This stability, combined with its strong potential, positions Solana as an important player in the decentralized industry, especially if it can keep pace with its competitors, including Ethereum competitors and Layer 2 projects.