Solana’s native token, SOL, has experienced a significant price drop of 46% over the past three months, despite the launch of Firedancer and rising Solana network transactions. This decline in price has led to low bullish confidence among investors, as indicated by the SOL funding rates. The funding rates signal the demand for bullish or bearish positions, and a low funding rate suggests weak demand for bullish leverage.
The Solana ecosystem has been growing, with the launch of new projects and the expansion of existing ones. However, the demand for SOL has been declining, leading to a decrease in the token’s price. The total locked value (TVL) of Solana has also been declining, with a drop of over $10 billion since its peak in September. This decline in TVL suggests a decrease in user engagement and a lack of confidence in the Solana ecosystem.
Decline in DApp Sales and DEX Activity
The sales of decentralized applications (DApps) on Solana have declined sharply, with a decrease of 67% in DEX volume since January. This decline in DApp sales and DEX activity suggests overall market fatigue, even as the Solana ecosystem continues to grow. The revenue from DApps on Solana has also fallen, with a decrease of $11 million per week compared to two months earlier.
Solana TVL (left) vs. 7-day DApp revenue (right), USD. Source: DefiLlama
Memecoin Demand Fades
The demand for memecoins has also been declining, with a significant drop in memecoin market capitalization. This decline in memecoin demand has had a negative impact on the SOL price, as memecoins have been a key driver for SOL in the past. The memecoin market capitalization has fallen significantly, with a decline of over $19 billion since the cryptocurrency market’s flash crash on October 10.
Memecoin market cap, USD. Source: TradingView
Solana Network Fees and Transactions
The fees on the Solana network have fallen by 21% over the past 30 days, but declines have been steeper on competing blockchains. According to Nansen data, fees on the BNB chain fell by 67%, while Ethereum saw a 41% decline over the same period. The number of transactions on Solana has increased by 6%, while activity on the BNB chain decreased by 42%.
Blockchains sorted by 30 day network fees. Source: Nansen
The Demand for SOL Long Leverage is Disappearing
SOL perpetual futures can be a useful indicator of trader sentiment, as exchanges charge fees to either buyers (longs) or sellers (shorts) depending on leverage demand. The funding rate for SOL perpetual futures has been declining, with a current annual funding rate of 6%. This low funding rate suggests weak demand for bullish leverage, and it may take some time for bulls to regain their conviction following SOL’s 46% price decline over three months.
SOL Perpetual Futures 8 Hour Funding Rate. Source: CoinGlass
Despite the decline in SOL price and demand, there have been several recent developments in the Solana ecosystem that are expected to spark renewed investor interest. The launch of Firedancer, a new validator client designed to expand processing capacity, is one such development. Additionally, Kamino, TVL’s second-largest Solana DApp, has announced new products, including fixed and term loans, off-chain collateral, personal loans, and an on-chain Bitcoin-backed institutional credit line.
Whether SOL can recapture the $190 level last reached two months ago remains uncertain, and it is unlikely that improved validation software or expanded DApp offerings alone will restore the confidence needed to support a sustainable uptrend. For more information, visit https://cointelegraph.com/news/sol-struggles-as-solana-tvl-slides-memecoin-demand-fades?utm_source=rss_feed&utm_medium=rss_category_market-analysis&utm_campaign=rss_partner_inbound
