After Solana surges, look for the next sector rotation opportunity

This article will explore an in-depth analysis of the latest Solana rally and the next potential “wealth code”.

Note: This article is not about buying Solana or which tokens in the Solana ecosystem, as the market is currently highly saturated, but rather about what I think the next sector rotation in the market will look like.

This involves understanding where current speculators on Solana are profiting, especially those early in the ecosystem, and where they might turn next.

I believe this is a more attractive and critical play, so that is the point, everything covered in this article is for short to medium term volatility opportunities. This article will be especially relevant if you are worried about FOMO and plan to hold any position due to the current price surge.

First and foremost, let’s be clear: regardless of short-term volatility, I remain bullish on Solana (SOL) in the long term.

Solana rises

First, let’s talk about where Solana is currently. Now looks like a good time to start taking profits. The chart shows a gain of about 12% even on the 4-hour timeframe. If this momentum continues, we could see a single-day gain of up to 50%, which is unsustainable.

If I were still holding Solana at this point, I would definitely take profits, or at least wait for a pullback before buying back in, as the risk-reward ratio no longer seems favorable.

The Current State of Solana: Is It Time to Invest?

Do you have FOMO?

While Solana has been performing well, it’s worth noting that I would not condone a blanket bet on it in the short term, especially compared to other opportunities. Similar to Chainlink’s recent run-up to $15, I don’t find it particularly attractive due to its aggressive growth.

Solana has been consolidating since November 1st, and I am watching closely to see if it breaks out. When it broke out on November 7th, I took profits at over $50, thinking that was a good enough profit.

What’s happening in the Solana ecosystem?

Many on Twitter are talking about the significant gains for the Solana ecosystem.

We will verify this by looking at the various projects within the Solana ecosystem on CoinGecko . Most of them have increased significantly in value, and this excitement is driving liquidity within the ecosystem.

SOL ecosystem has made progress in the past 7 days

The surge in the Solana ecosystem is not limited to major coins, but also includes altcoins such as Bonk and Radium, which have made significant gains. I have added to my altcoin positions this month and last month, and those who buy in soon will make good profits in a short period of time.

So, should you buy now? The answer is no. Solana and the ecosystem tokens are about to adjust, after which you can consider taking a position. Right now, it is mainly driven by speculative trading rather than long-term growth potential.

This pattern is consistent with past market behavior and suggests that the current focus on the Solana ecosystem will soon shift.

Where will the hot money flow next?

(Consider this until next week, after which it will no longer apply)

At this stage of the bull market, it is common to see funds rotate into different ecosystems. In the past, we have witnessed similar rotations between Solana, Luna, and Avalanche (AVAX) at the peak of the bull market in late 2021 and before.

This happens because the crypto market is driven by sentiment and traders and profit seekers looking for on-chain opportunities. When one ecosystem becomes overbought, traders move on to the next one.

Solana is the center of attention in the market right now. However, I think it’s time to focus on the next potential hotspot.

These shifts can happen quickly, so staying ahead of the curve is critical.

Therefore liquidity will flow into the Polygon , Avalanche and Arbitrum ecosystems.

I’m trading Avalanche at around $14.50 with a stop loss of $12 and a take profit target of at least $20. Both Avalanche and Solana are considered Ethereum killers, and historically, money has flowed between these ecosystems during bull runs.

In addition to Avalanche, I am also keeping a close eye on the Arbitrum ecosystem. Arbitrum is an L2 solution for Ethereum that has an incentive plan to attract swing traders. I also took a trade in Arbitrum because I believe it has the potential to grow significantly in the next week.

Focus on the top projects in these ecosystems to maximize investment opportunities.

Case in point: AVAX and Arbitrum (and possibly MATIC) and tokens specifically built to run on those networks will be an emerging focus this week and next.

If we want to dive deeper into these ecosystems, we can look at specific altcoins within them. Within the Avalanche ecosystem, I’m bullish on the potential of GMX , Radiant Capital , Benqi Protocol, Trader Joe’s , and Camelot .

These projects are either decentralized exchanges or lending platforms built specifically for the Avalanche and Arbitrum ecosystems. They have the potential to perform well when liquidity flows into the ecosystem. Arbitrum is attractive because it is popular among DeFi traders and the incentive program is increasing yields.

AVAX tokens on the chain are sorted by TVL from high to low

Despite AVAX's overall growth, these specific platforms remain undervalued, so there is potential for significant returns.

Likewise, within the Arbitrum ecosystem, Ethereum-related platforms such as GMX and Radiant Capital are also poised to breakout.

Polygon ?

In addition to AVAX and Arbitrum, Polygon (MATIC) has also emerged as a competitor, especially as it is about to upgrade to Polygon 2.0 and rename its MATIC token to POL. Polygon has undergone a token upgrade to become the Polygon (Pol) token with new token economics. Although Polygon's ecosystem is not primarily DeFi-focused, the rebranding and token upgrade will attract attention.

Be sure to get the rhythm right, ecosystem sector rotation only happens a few times. Usually, by the third time it happens, the trend is completely gone.

This is because people are still very enthusiastic about the Solana ecosystem and are willing to invest in Solana altcoins. When these people turn to AVAX, they have witnessed the rise and fall of the Solana ecosystem, so they want to rotate faster. They invest in the top AVAX altcoins and are likely to quickly exit and move to the next chain once they see the gains, whether it is Arbitrum or Polygon.

As people get more used to this way of trading, the process will get faster. That's why I don't recommend entering an ecosystem with a very small plate.

In the rotation of hot spots, always being one step ahead is crucial to maximizing opportunities and profits.