Solana’s native token, SOL, is experiencing a downward trend, currently trading at $170.99—a 3% drop from previous levels. This decline is part of a broader bearish movement across the cryptocurrency market, following SOL’s inability to maintain its position above $180 on October 30.
Decreasing Network Activity – A Significant Factor
The recent price slump of SOL can be attributed to a noticeable decline in on-chain activity. Fewer users are engaging with the Solana network, which has contributed to the diminishing momentum of the token. Data from DeFiLlama indicates that the total value locked (TVL) on Solana has sharply decreased from $7.2 billion on October 27 to $6.2 billion on October 31—an alarming 13.8% drop. This significant reduction suggests that both users and developers are less active within the network.
Moreover, insights from Blockworks Research reveal that Solana’s economic activity has also taken a hit. The real economic value, encompassing all revenue sources including base fees and priority fees, plummeted from an all-time high of $11.1 million on October 24 to a mere $7 million currently.
Memecoins and Market Sentiment
The downturn in SOL’s price coincides with corrections in various Solana-based memecoins, which are seeing significant daily losses. For instance, Dogwifhat (WIF), the leading Solana memecoin by market capitalization, has decreased by over 1.4% within the last 24 hours. Other notable declines include Bonk (BONK), down 5.3%, and Cat in a Dogs World (MEW), which has dropped 4.9%. The largest losses, however, were recorded by Gigachad (GIGA) and Goatsues Maximus (GOAT), down 8.7% and 7%, respectively.
Adding to the grim picture, the overall market capitalization of Solana-based tokens has shrunk from $277.9 billion to $275.2 billion, accompanied by a 25.7% decrease in total trading volume. Investors are clearly responding negatively to the declining value and market activity within the Solana ecosystem, influencing SOL’s price drop.
Technical Indicators – Signs of Bearish Divergence
Technically, SOL’s current drop also reveals a growing bearish divergence between its price and the relative strength index (RSI). From October 24 to 29, SOL’s price formed higher highs, while its daily RSI descended, marking lower highs. In technical analysis, this divergence indicates a weakening uptrend, prompting traders to sell at local highs.
Notably, the token entered overbought territory on October 24 when the RSI peaked at 72, signaling buyer exhaustion and leading to profit-taking corrections.
Also Read: Solana Trading Volume Plummets – What A 40% Decrease Means For SOL’s Price Trajectory
As SOL faces these challenges, market participants will closely monitor both network activity and technical indicators. The recent trends suggest that unless there’s a significant turnaround in engagement and investor sentiment, SOL may continue to struggle in the near term. As always, traders are urged to exercise caution, staying informed about market dynamics that could impact their investments.
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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