Key takeaways:
SOL funding rates reflect a lack of bullish confidence following a 46% price decline, despite the launch of Firedancer and an increase in Solana network transactions.
Activity and revenues from Solana DApps and DEX have significantly decreased, indicating wider market fatigue even as Solana’s ecosystem expands.
Solana’s native token, SOL (SOL), has struggled to maintain prices above $145 for the past month. The drop in network engagement due to reduced demand for decentralized applications has adversely influenced SOL’s outlook.
With Solana’s TVL now down over $10 billion since its peak in September, on-chain metrics suggest that user engagement is declining more rapidly than anticipated.
The total value locked (TVL) in Solana has been decreasing since it hit an all-time high of $15 billion in September. A decline in smart contract deposits has increased the amount of SOL available for sale. Meanwhile, revenues from decentralized applications (DApps) on Solana have dropped to $26 million weekly, down from $37 million two months ago.
The interest in memecoins has also diminished since the cryptocurrency market crash on October 10, which revealed significant vulnerabilities in leveraged positions and the general liquidity of smaller altcoins. Regardless of whether derivatives markets exacerbated the situation, traders have grown apprehensive about DEX platforms following the $19 billion liquidation.
Memecoins have significantly influenced SOL, especially after the Official Trump (TRUMP) launch in January, which caused volumes on Solana’s decentralized exchange (DEX) to soar to $313.3 billion that month. According to DefiLlama data, this activity has since contracted by 67%, partially accounting for the declining revenue trends of Solana DApps.
Nevertheless, the decreased interest in blockchain-based applications may signify a broader market slowdown rather than specific weaknesses within Solana.
Solana network fees have decreased by 21% over the past 30 days, although rival blockchains have seen larger drops. Fees on the BNB Chain fell by 67%, while Ethereum experienced a 41% drop during the same timeframe, according to Nansen data. Additionally, transaction numbers on Solana increased by 6%, while BNB Chain activity fell by 42%.
SOL long leverage demand vanishes
SOL perpetual futures can serve as a useful indicator of traders’ sentiment, as exchanges charge either buyers (longs) or sellers (shorts) based on leverage demand. In neutral market conditions, the funding rate typically hovers between 6% and 12% annually, with longs covering costs to maintain their positions. A negative funding rate, however, indicates broader bearish sentiment.
As of Friday, SOL’s annualized funding rate was 6%, displaying weak demand for bullish leverage. The atypical 11% negative reading from Thursday should not be viewed as a significant demand for bearish positions, as market makers acted quickly to address imbalances. However, rebuilding bullish conviction may take time following SOL’s 46% price drop over the past three months.
Recent advancements in the Solana ecosystem are anticipated to rekindle investor interest, including Friday’s mainnet launch of Firedancer, a new validator client aimed at enhancing processing capacity. The project, overseen by Jump Trading—one of the industry’s leading market makers—took over three years to develop. Developers reported strong feedback after the validator node re-synced in under two minutes.
Related: J.P. Morgan taps Solana for Galaxy’s tokenized corporate bond issuance
Kamino, ranked as the second-largest Solana DApp by TVL, also introduced new products on Friday, including fixed-rate and term borrowing, offchain collateral, private credit, and an onchain Bitcoin-backed institutional credit line. Kamino’s $69 million in annualized fees and an average yield of 10% on deposits clearly indicate the ecosystem’s expansion.
It remains uncertain if SOL can return to the $190 level it reached two months ago. Simply improving validation software or expanding DApp offerings is unlikely to adequately restore the confidence necessary to support a sustainable bullish trend.
This article is for general information purposes and is not intended to be and should not be taken as, legal, tax, investment, financial, or other advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph. While we strive to provide accurate and timely information, Cointelegraph does not guarantee the accuracy, completeness, or reliability of any information in this article. This article may contain forward-looking statements that are subject to risks and uncertainties. Cointelegraph will not be liable for any loss or damage arising from your reliance on this information.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. While we strive to provide accurate and timely information, Cointelegraph does not guarantee the accuracy, completeness, or reliability of any information in this article. This article may contain forward-looking statements that are subject to risks and uncertainties. Cointelegraph will not be liable for any loss or damage arising from your reliance on this information.
