Solana (SOL) is currently navigating through turbulent waters, with its price failing to sustain above the $200 mark after multiple rejections between December 25 and December 26. This price movement aligns with broader market declines, as the overall cryptocurrency market fell by 3.5% during the same period. However, Solana underperformed with a 5.1% correction, raising concerns about further price declines among traders.
A primary concern lies in Solana’s on-chain network volumes, which have dropped by 30% over seven days. Despite securing second place in weekly volumes with $20.9 billion, Solana experienced the steepest decline among the top 10 blockchains. For comparison, Ethereum’s network volumes fell by only 15%, and Sui’s volumes dropped by 8%. Additionally, Ethereum’s ecosystem, bolstered by layer-2 solutions like Arbitrum, Optimism, Base, and Polygon, has continued to outperform Solana.
Solana’s decentralized applications (DApps) also showed signs of struggle, with a notable 39% decline in activity for Orca and Phoenix and a 30% drop for Raydium. Worse yet, Solana-based memecoins, which previously attracted significant user interest, posted poor 30-day performances. Popcat, Dogwifhat (WIF), and BONK all saw significant declines of 42%, 40%, and 25%, respectively. This downturn in memecoins, which have traditionally driven new users to the network, highlights the challenges Solana faces in maintaining user activity and SOL demand.
On the positive side, total deposits on the Solana network reached a two-year high of 44 million SOL, driven by platforms such as Binance Staked SOL and Jupiter. However, several platforms, including Jito and MarginFi, saw a decline in deposits.
Despite the drop in SOL’s price, derivatives data indicates a resilient outlook. The premium on SOL’s monthly futures contracts is currently at 10%, signaling a neutral-to-bullish sentiment from professional traders. Additionally, the futures market shows limited downside risk for SOL, suggesting a potential price floor near $180.
In conclusion, while Solana is facing short-term challenges due to declining network activity and memecoin interest, the derivatives market suggests that the downside risk remains limited, with whales and market makers showing continued optimism.
Also Read: Solana’s TVL Drops to 2024 Low as DeFi Activity Declines: Can SOL Reverse the Bearish Trend?
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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