Solana Faces Potential Downside Amid Declining Network Activity and Reduced Demand

• Recent developments in the cryptocurrency market highlight the struggles faced by Solana as it battles declining network activity and market sentiment.

• As transaction fees reach a six-month low, the future of Solana’s price stability seems precarious, raising concerns about its competitive position in the market.

• According to COINOTAG, “Without a rebound in activity, Solana’s price could regress further, potentially impacting its long-term viability.”

Solana faces declining network activity and transaction fees, risking further price corrections following a recent downturn to a seven-month low.

Solana’s Network Activity Hit Multi-Month Lows

Solana’s network activity is fading fast, with transaction fees plunging to a six-month low of 53,800 SOL last week – an 85% collapse from January’s peak during the TRUMP and MELANIA meme coin frenzy.

Source: Artemis Terminal

With fewer traders interacting on-chain, demand for SOL is shrinking. Solana’s Total Value Locked (TVL) has also dropped to $8.15 billion from $14.50 billion in mid-January, signaling a major liquidity exit.

The impact goes beyond fees – active addresses have dropped 35% to 3.8 million.

With Solana’s network activity on a decline, no key demand zones on its price chart, and massive unwinding in both Futures and DeFi trade, holding $120 looks increasingly difficult.

Is a deeper drop to new yearly lows next?

Key Levels to Watch

The factors above align with SOL’s 55% price drop since mid-January, just a day after hitting its $270 all-time high.

The surge in Solana’s network activity driven by the TRUMP and MELANIA memecoin frenzy has clearly faded.

With the crypto market shedding over $200 billion and Bitcoin sliding below $80K, high-cap assets like SOL are struggling to hold key levels.

Sell-side liquidity has driven $40.75 million in long liquidations, reinforcing downside pressure.

Given weak on-chain demand on Solana’s network, heavy liquidations, and continued unstaking, SOL risks extending losses toward $100 – $112 – especially if Bitcoin fails to reclaim critical support.

Source: TradingView (SOL/USDT)

This level previously acted as a strong demand zone a year ago, sparking a rebound to $180.

However, given the deterioration in Solana’s network activity and the broader risk-off sentiment, a FOMO-driven recovery remains distant, potentially exposing SOL to a deeper drop toward $100.

Conclusion

In summary, Solana is facing significant challenges as reduced network activity and a shaky market push it closer to critical support levels. With ongoing sell pressure, the potential for a downturn toward new yearly lows looms large, making it crucial for traders and investors to monitor the situation closely. The near-term outlook for SOL appears grim unless a rebound in activity brings renewed interest and demand.