Solana’s Price Faces Pressure from Declining Onchain Activity and Memecoins, But Derivatives Data Hints at Limited Downside

• The recent downturn in Solana’s price illustrates a broader trend of declining onchain activity and waning interest in memecoins.

• Despite a challenging environment, Solana’s total value locked on platforms indicates a resilience among certain segments, suggesting a potential foundation for recovery.

• As per a report from COINOTAG, derivatives market data shows that significant stakeholders remain optimistic despite recent price corrections.

Solana faces pressure from declining network activity and memecoin interest, but derivatives signals suggest limited downside risk for SOL in the near term.

Declining Network Activity and Its Impact on Solana (SOL)

In the past week, Solana (SOL) has encountered a significant challenge, with its price unable to maintain the $200 mark after experiencing multiple rejections. Starting from December 25 to December 27, the overall cryptocurrency market took a 3.5% dive; however, Solana’s performance was notably worse, reflecting a 5.1% correction. This disparity has raised red flags among traders, who are increasingly concerned about the potential for further declines.

A major contributor to this bearish sentiment is the 30% reduction in onchain network volumes over the past seven days. These dwindling volumes have placed Solana in a challenging position, particularly when assessed relative to its peers.

Comparative Performance Across Top Blockchains

When examining network volumes for various blockchains, Solana came in second with a total of $20.9 billion over the week. Unfortunately, this figure reflects the worst performance among the top 10 blockchains; Ethereum, for instance, only dropped by 15% in its on-chain volumes. Solana’s struggles against Ethereum’s robust ecosystem have further exacerbated concerns.

Looking specifically at decentralized application (DApp) activity, the numbers are equally concerning. Noteworthy declines were seen in popular platforms such as Orca and Phoenix, which experienced a 39% decrease in activity, while Raydium saw its activity fall by 30%. These metrics highlight the gravity of the situation and the need for improved engagement on the Solana network.

Memecoins: A Decline in Interest

The performance of memecoins, which have historically attracted a significant number of new users to Solana, mirrors the declining sentiment observed across the board. Popular tokens such as Popcat saw a staggering 42% drop in price over the 30 days leading up to December 27, followed closely by Dogwifhat and BONK with respective declines of 40% and 25%.

This downturn is compounded by the fact that, while the larger cryptocurrency market capitalization remains stable, Solana continues to face challenges in retaining new users and fostering onchain activity essential for demand.

Futures Market Signals: A Slight Resilience

Despite the negative trends in onchain activity and memecoin interest, data from the derivatives market suggests a more nuanced outlook for Solana. Typically, in neutral markets, monthly futures contracts display a premium of 5% to 10%. Currently, Solana’s futures market is operating with around a 10% premium, which is down from a previous 20%, but still indicates some level of confidence from derivative traders.

Interest in Solana’s perpetual futures is crucial for understanding retail trader sentiment. Recent data indicates that funding rates have remained low, under 0.015% for the past month—the equivalent of an annualized 1.2%. A shift to a negative funding rate on December 27 suggests that demand from leveraged buyers is waning, further complicating the market landscape.

Conclusion

Overall, Solana is currently navigating a turbulent market characterized by declining network activity and reduced enthusiasm for memecoins. The mixed signals from the derivatives market suggest that while there are pockets of optimism among certain traders, the potential for further price declines exists, particularly if engagement does not improve. As Solana continues to adapt to market dynamics, stakeholders will need to closely monitor onchain activity and derivatives indicators to gauge the future trajectory of SOL.