Solana’s native token SOL (SOL) saw a significant drop of 22% in just eleven days after reaching $126.30 on December 25, 2023. While some analysts argue that the current price of $98.40 represents a 61% gain from the previous month, crypto traders are quick to shift their portfolios when better opportunities arise. This has led investors to question whether the sentiment towards SOL’s token price is deteriorating.
One possible reason for SOL’s rally is attributed to the airdrop frenzy that occurred after the newly launched JITO token was listed on major centralized exchanges on December 7, 2023. Within the first few hours of trading, JITO achieved a market capitalization of over $300 million. This success was followed by the BONK memecoin on December 14, 2023, which led to the Solana Saga phone selling out as some airdrops targeted mobile phone owners.
Despite multiple competing blockchains experiencing outages due to increased activity in December 2023, Solana’s bullish momentum was supported by a significant surge in volume within its decentralized applications (DApps) ecosystem.
However, after the initial rush for Solana SPL tokens subsided, resulting in losses for JITO (JTO), DogWifHat (WIF), and BONK, investors are now questioning whether there is anything else supporting SOL’s $42 billion valuation that makes it the fourth-largest cryptocurrency excluding stablecoins.
Examining Solana’s total value locked (TVL), it becomes apparent that demand has been declining, although it’s not yet a point of concern. Solana’s TVL, in SOL terms, reached its peak at 15.4 million SOL deposits on December 19, 2023, but experienced a 17% decline to 12.8 million SOL on January 5, 2024. However, the current TVL reflects a 13% increase from the previous month.
To assess the impact of SOL token’s 9% weekly decline on Solana network demand, it is important to analyze activity in terms of DApps volume and active addresses. Solana’s declining activity in the seven days leading up to January 5, 2024, is noticeable in terms of active addresses and volumes. Additionally, Solana’s market share in terms of volumes is relatively low compared to more established blockchains like Ethereum or BNB Chain.
Furthermore, the reduced demand for Solana’s DApps extends across every sector, including decentralized finance (DeFi), liquid staking, games, social networks, and NFTs. Leading decentralized exchange (DEX) Jupiter Exchange faced a 26% weekly decline in volumes, while the NFT marketplace Magic Eden experienced a 24% drop in active addresses.
Considering the weakness in Solana’s DApps activity and the declining interest in leverage longs, investor appetite for SOL seems to have plateaued. While a new wave of airdrops may spark further interest, the recent 9% correction aligns with the decreased demand for the Solana network.
It is important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research and make informed decisions when it comes to investing and trading.