Solana (SOL) reached a $216 best loftier on Sept. 9 after rallying 508% since August. The bull run caused some analysts to projection a $500 target tha would translate to a $150 billion market capitalization.

It is worth noting that during SOL'south rally, the Ethereum network'due south average transaction fee surpassed $40. Surging interest in the nonfungible token (NFT) market accelerated investors' transition to Solana, which was boosted past the launch of FTX's NFT marketplace on Sept. half dozen.

Solana, Barrage, and Cosmos price at Binance. Source: TradingView

The to a higher place chart shows SOL's 2-calendar month performance compared to Avalanche (AVAX) and Cosmos (Atom). Both are fighting for the same decentralized application user-base and offer faster and cheaper transactions compared to Ethereum (ETH).

Major players in the manufacture also invested in Solana's ecosystem due to its potential against Ethereum. In June, Andreessen Horowitz and Polychain Capital letter led a $314-million funding round in Solana Labs, which was too funded past venture capital firm Andreessen Horowitz, Polychain Majuscule and Alameda Research.

Is Solana's outage weighing on SOL toll?

At Table salt Conference 2022, Solana founder and CEO Anatoly Yakovenko told Cointelegraph that the network "is optimized for a specific use case: online central limit order book, a trading method used by exchanges that match bids with offers. It was designed for market makers who need to submit millions of transactions per 24-hour interval."

Yakovenko so added: "There are Pareto efficiency tradeoffs. If I optimize for hash power security, that means I can't have a lot of TPS. You lot take to pick i or the other."

Curiously, on Sept. fourteen, the Solana network experienced an outage that lasted over 12 hours. The team explained that a large increase in transaction load to 400,000 per 2nd had overwhelmed the network, creating a denial-of-service that caused validators to first forking.

Solana futures aggregate open interest. Source: Bybt.com

Despite the recent setback, Solana futures markets amass open involvement sits at $1 billion, a 640% increase in 2 months. This effigy makes Solana's derivatives market the third largest, backside Bitcoin (BTC) and Ether (ETH). This information confirms investors' interest, but it can't exist deemed bullish because futures buyers (longs) and sellers (shorts) are matched at all times.

Derivatives markets point toward a balanced situation

To answer this question, i must analyze the funding rate. Perpetual contracts, also known as changed swaps, take an embedded charge per unit ordinarily charged every viii hours. This fee ensures there are no exchange risk imbalances. A positive funding rate indicates that longs (buyers) are the ones demanding more leverage.

Even so, the opposite state of affairs occurs when shorts (sellers) require additional leverage, and this causes the funding charge per unit to turn negative.

Solana perpetual futures viii-60 minutes funding charge per unit. Source: Bybt.com

As depicted above, the eight-hour fee reached a 0.12% tiptop on Sept. 5, which is equivalent to 2.v% per week. This momentary spike seized speedily as SOL faced extreme volatility on Sept. 7. Afterward peaking at $195, the SOL price crashed by 35% inside nine hours and liquidated leveraged positions, leading to the current residuum betwixt the longs and shorts.

Data shows no prove of investors rushing to add leveraged long positions despite the current $1 billion open up interest. Moreover, because the 410% gain in the last ii months, traders take reason to fright further downside considering Bitcoin has also failed to suspension the $50,000 psychological barrier and it is nonetheless to confirm if the contempo sub-$xl,000 dip was the short-term bottom.

The views and opinions expressed here are solely those of the author and practise not necessarily reflect the views of Cointelegraph. Every investment and trading move involves gamble. You should conduct your own research when making a decision.