SOL Price Drops 26% From All-Time High as Solana Network Activity Dwindles

Solana's native token SOL saw its price drop by 17.2% between Jan. 24 and Jan. 27. After touching its lowest levels in 10 days, the price recovered to $235

Solana’s native token (SOL) experienced a 17.2% price decline from Jan. 24 to 27. After reaching its lowest point in 10 days, the price recovered to $235, which is still 26% lower than its Jan. 19 all-time high of $295.

This recent downturn can be partially attributed to a 40% decrease in Solana’s network onchain trading activity. Despite this short-term weakness, SOL has the potential for further gains in 2025.

Solana’s competitors demonstrated more resilience. BNB Chain volumes decreased by only 1%, while Ethereum’s base layer experienced a 10% decline in activity over seven days. It’s worth noting that other competitors and Ethereum layer-2 solutions also reported 25% to 30% lower onchain volumes during the same period.

Within Solana’s ecosystem, Meteora, Orca, and Lifinity experienced notable declines in volumes, with drops of 45%, 62%, and 53%, respectively. However, the Pump.fun memecoin launchpad saw a 24% increase in volume during the same timeframe. Solana's Raydium platform remained the leader, recording $35.1 billion in weekly onchain activity.

Solana TVL rose 27%, outperforming Ethereum and BNB Chain

It would be insufficient to evaluate SOL’s potential upside based solely on Solana’s onchain activity, which is heavily driven by decentralized exchanges (DEXs). Activities like staking, lending, and real-world assets (RWA) applications often don’t generate consistent onchain volumes. Therefore, total value locked (TVL) provides a more comprehensive measure of network usage.

The TVL on Solana increased by 27% in the 30 days ending Jan. 28, significantly outperforming both Ethereum, which declined by 9%, and BNB Chain, which slipped by 1%. This growth solidified Solana’s second-place position in the market, widening the gap with Tron. Notable contributors include Jito and Raydium, which saw deposits rise by 29%, and Binance Staked SOL, which grew by an impressive 52% during the month.

Ethereum’s recent activity decline can be linked to weaker performances in Lido, EigenLayer, and Ether.fi. Notably, staking platform EigenLayer, launched in June 2023, holds $13.6 billion in total value locked (TVL), surpassing the entire Solana ecosystem’s deposits. This highlights Ethereum's dominance and shows that some investors are still willing to pay $5 or higher transaction fees.

To understand Solana traders’ sentiment, it’s crucial to examine the monthly SOL futures contracts premium. Futures contracts typically trade at a 5% to 10% premium over spot markets to account for their longer settlement periods. A premium above 10% indicates strong bullish sentiment, while levels below 5% suggest weaker buyer confidence.

On Jan. 27, SOL futures briefly spiked to a 12% annualized premium but quickly dropped back to 6%. This relatively low premium, despite a 21% price rally over the past 30 days, suggests a lack of enthusiasm among investors. Some analysts argue that recent SOL price gains were largely driven by memecoins and the launch of the Official Trump (TRUMP) token.

Regardless of whether risk aversion stems from uncertainties in global economies or stock markets, the odds of SOL reaching a new all-time high in the short term appear slim. Some analysts point out that recent SOL price gains were largely driven by memecoins and the Official Trump (TRUMP) launch.

Potential drivers for SOL’s future price appreciation include the migration of stablecoins from Tron to Solana and the increasing adoption of Web3 applications, particularly in the artificial intelligence sector.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment 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.