Solana ( SOL ) is starting to capture the spotlight as a serious contender to Ethereum ( ETH ), even though its market capitalization is about four-times smaller than the leading smart contracts platform.

On Oct. 23, the SOL/ETH trading pair climbed to a new record high of around 0.0692 ETH. The move is part of a prevailing bull run that has seen it rallying by 600% since 2023.

SOL/ETH weekly price chart. Source: TradingView

Solana’s rise against Ethereum has ignited discussions about its potential to flip Ethereum’s market capitalization in the not-too-distant future.

Source: X

At the center of this bullish Solana outlook is its increased network usage and upcoming updates that could potential enable it to reduce Ethereum’s dominance in the blockchain space.

Solana’s DEX volume nears Ethereum

One of the key drivers behind Solana’s recent surge appears to be the explosion of decentralized exchange (DEX) usage on its platform.

For instance, Solana’s daily DEX trading volume (gray) has seen consistent growth since August 2023, with a clear acceleration beginning in early 2024. It has occasionally matched or even surpassed Ethereum’s DEX volume (green) during peak periods.

Solana vs Ethereum DEX volumes. Source: Ally/Dune Analytics

Ethereum continues to dominate DEX trading by volume, maintaining an average daily trading range significantly higher than most layer-1 competitors, including Solana.

Still, Solana’s consistent increase indicates a growing appeal for traders on its network, suggesting a shift in user behavior toward Solana-based DEX platforms.

The lower transaction fees and rapid transaction speeds on Solana have made it an attractive destination for launching an incalculable number of new tokens, many of which fall under the memecoin category .

Most Solana DEX users have engaged in memecoin-related activities (gray bar in the chart below) across 2024 that have exploded in volume in recent weeks.

Solana trader by sector. Source: Ally/Dune Analytics

The “WIF & BONK sector” (orange), representing popular memecoin projects, has also seen an uptick, signaling that these projects are a big part of Solana’s increased activity in recent times.

“ETH might actually never go to all time highs again,” analyst Jack argues , adding:

“SOL is really doing what I didn’t think was ever actually possible: replacing the network as a whole and taking all its users.”

Related: Ethereum ICO participant dumps 3,000 ETH for $7.6M cash out

Can SOL actually “flip” ETH?

The possibility of a “flippening,” where Solana surpasses Ethereum in both technical capability and market valuation, could rise due to memecoins in particular, as they have been a critical driver of Solana’s recent growth.

Historically, memecoins have thrived in bullish market conditions when speculation runs high, but they have faced severe corrections during market downturns.

Today, Solana must grow 3.5 times its current market capitalization to reach Ethereum’s $304 billion valuation. However, analysts at VanEck  speculate  that Solana could reach 50% of ETH’s value in the coming years if it continues to outperform Ethereum in terms of daily active users and transaction volume.

SOL vs ETH market capitalization. Source: TradingView

Meanwhile, Bitfinex analysts suggest that Solana’s success hinges on expanding its user base beyond speculative traders. To achieve long-term, sustainable growth, Solana needs to attract DeFi enthusiasts, traditional finance institutions, and enterprises.

They noted that the Firedancer upgrade in 2025, which aims to boost Solana’s capacity to handle up to 1 million transactions per second, could potentially make its network more appealing to larger investors and institutions

Excerpts from their Bitfinex report:

“If Solana can capitalise on this [Firedancer] growth, the ‘flippening,’ where Solana surpasses Ethereum in market cap, could become more than just speculative theory.”

Related: Solana has 100M active wallets, but most are empty

Technicals hint at a big pullback in 2025

Solana’s technicals, however, are already looking extremely overvalued against Ethereum, suggesting a high possibility of a correction ahead.

At least three indicators are leaning bearish, including an overbought weekly relative strength index (RSI), a bearish divergence, and a rising wedge breakdown potential.

The weekly RSI for the SOL/ETH pair is near 70, indicating that it’s entering overbought territory. Meanwhile, there is a growing divergence between the rising SOL/ETH price and the falling RSI, signaling weakening price momentum.

SOL/ETH weekly price chart. Source: TradingView

Lastly, Solana price is slowly climbing inside a rising wedge , a bearish pattern characterized by converging trendlines. A breakdown from this structure would likely lead to a sharp decline, with potential targets around the lower Fibonacci retracement levels.

If a breakdown occurs, SOL/ETH could drop into the 0.0357-0.0436 ETH range by early 2025. This target represents a potential decline of 40-50% from current levels.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.