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Solana’s native cryptocurrency SOL has faced significant price declines due to decreasing DeFi activity and upcoming token unlock events.
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The decline in Solana’s price not only reflects market sentiment from the recent launch of memecoins but is also indicative of underlying fundamental weaknesses in its DApp ecosystem.
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“The downturn in onchain activity and the pressures from the lock event are stressing SOL’s market performance,” said a recent analysis from COINOTAG.
Solana’s SOL token faces pressure from declining DeFi volumes and upcoming unlocks, compounded by recent memecoin activity affecting market sentiment.
Recent Decline: Solana Faces 17% Drop Amid Market Shifts
The price of Solana (SOL) has experienced a steep 17% decline from February 14 to February 18, with current trading figures hovering around $164. This substantial drop coincides with the launch and rapid downfall of the Libra memecoin, which saw an 83% price crash soon after its inception—an event tied to Argentina’s President, Javier Milei. However, attributing Solana’s market cap loss of approximately $18 billion solely to this memecoin’s volatility is a significant oversimplification.
Declining Onchain Activity Impacts SOL’s Performance
Despite the memecoin’s influence, evidence points to a prolonged period of declining volumes in Solana’s decentralized finance (DeFi) platforms. Increasingly, traders showed reduced interest in decentralized exchanges and new project launches, with decreasing onchain activity undermining SOL’s price. Demand for SOL heavily relies on the usage of decentralized applications (DApps), and with fewer participants, its price is adversely affected. The overall sentiment in the memecoin sector mirrored SOL’s decline, further complicating the narrative around its price movements.
Solana DEX Volumes Plummet: A Shocking 91% Dip in 30 Days
The decline in Solana’s daily trading volume stands out starkly; it fell from a peak of $35.5 billion on January 17 to just $3.1 billion by February 17. This sharp decrease has come following a wave of enthusiasm driven by memecoins like the Official Trump (TRUMP) memecoin, which, after endorsements, surged to a $15 billion market cap before fizzling out.
TVL Trends Show Solana Lagging Behind Competitors
On the decentralized finance front, total value locked (TVL) in Solana’s DApps declined by 19% over just two weeks. This downturn signifies a vital trend as the TVL is a significant indicator of the overall health and participant confidence in the ecosystem. In contrast, competing networks have experienced varied levels of growth during the same timeframe, with the BNB Chain showing 8% growth while Ethereum managed only a 2% drop, contrasting sharply with Solana’s performance.
Upcoming SOL Unlocks Set to Influence Market Dynamics
As SOL traders navigate this turbulent landscape, an upcoming danger nears: the heavy unlocking of SOL tokens set for the first quarter of 2025. Over 15 million SOL, valued at more than $2.5 billion, is expected to flood the market, which could exacerbate selling pressure. This unlock is significant—reviewing past unlock events, it shows a growth of 12 times the amount previously released in the prior quarter, which could further dampen trader sentiment.
Conclusion
In summation, Solana’s recent performance illustrates a confluence of challenges, characterized by plummeting onchain activity, a drop in DeFi trading volumes, and the pressures of imminent token unlocks. These factors have created a bearish outlook for SOL, pushing it to its lowest price point since November 2024. Without renewed interest in its DApps and stabilization in its tokenomics, Solana may continue to struggle amidst a competitive landscape.
