Home CryptocurrencyBitcoin 3 reasons why Solana (SOL) price went down this week

3 reasons why Solana (SOL) price went down this week

by SuperiorInvest

Solana’s native token, SOL (SOL), saw a 9% drop on January 18, hitting a low of $91.40. The ongoing rejection from the $100 level has persisted for the last 15 days. However, this should not be a cause for extreme concern, considering that the total cryptocurrency market capitalization has not been able to maintain levels above $1.6 trillion throughout 2024. Despite the recent setback, SOL posted an impressive gain of 84% in December, causing investors to express concerns about the lack of positive price momentum.

FOMO for Solana SPL token listings and airdrops fades

The FOMO (fear of missing out) that fueled SOL’s rally in December 2023 was triggered by the pumping of Solana SPL token airdrops, which included Jito (JTO), BONK, and Dogwifhat (WIF). This move spurred demand for the Solana Saga phone, as some projects targeted exclusive offers for these users. However, the situation seems to have changed as BONK faced a 15% correction between January 17 and 18, while JTO declined by 19% in the same period.

Another factor contributing to SOL’s recent correction was excessive optimism brought on by airdrop expectations. Some launches took longer than expected, while others provided only a temporary, short-term boost to their decentralized applications (DApps), disappearing after the respective airdrop snapshots. Analysts and influencers created lists of the most promising opportunities, but almost none of the tokens reached decent valuations and volumes.

In a post on social network

A major source of optimism for SOL token performance comes from deposit growth within the Solana Network decentralized finance (DeFi) industry.

Solana network total value locked, SOL. Source: DefiLlama

The total value locked (TVL), measured in SOL tokens, reached a high of 15.4 million on December 19, 2023, indicating a growth of 60% compared to the previous month. However, it has since stabilized at around 14 million. In addition to the TVL growth in liquid staking solutions Jito and Marinade Finance, Kamino, Orca and Solend DeFi applications also managed to exceed $150 million in deposits each.

Additionally, there has been undeniable growth in Solana network activity in terms of transactions and volumes, although its numbers still lag behind competitors such as BNB Smart Chain and Polygon.

The main blockchains by volume of DApps in the last 7 days. Source: DappRadar

Note that Solana witnessed an 8.5% decline in transactions and the number of active DApps users in the last seven days. However, Solana’s DApp volume in the period, totaling $594 million, is significantly lower compared to BNB Smart Chain’s $6 billion or Polygon’s $1.6 billion. On the positive side, Solana leads with an absolute number of transactions of 72.3 million, which can be partly attributed to its lower costs.

Solana Network Strength Paves the Way for a SOL Price Recovery

Solana’s heavy reliance on heavy processing validation has generated substantial criticism for the project. However, at the same time it has presented a unique opportunity for DApps that require extensive bandwidth, such as token drops, non-fungible token (NFT) collections, gaming, and social media. For example, the Solana network became the third largest network in NFT market volumes, according to CryptoSlam.

NFT market 30-day volumes, USD. Source: CryptoSlam

NFT volumes on Solana reached $270.5 million, trailing Ethereum by just 20%, with Ethereum dominating in terms of the most valued collection. Among Solana’s most traded NFTs are Saga Monkes, Froganas, Mad Lads, and Tensorians.

Solana network activity does not indicate a risk of a strong SOL price correction, considering its resilience in terms of DApps and TVL volumes. However, there is negative pressure on the demand for SOL tokens following excessive expectations related to airdrops and the performance of SPL tokens.

SOL’s market capitalization stands at $40.6 billion with a price of $94, 50% below its November 2021 high.

Consequently, there is potential for profit if the network continues to attract interest from projects that value its stability in the face of excessive network processing demand. This is especially significant as most competitors have experienced sudden increases in transaction fees or prolonged instability.

This article does not contain investment advice or recommendations. Every investment and trading move involves risks, and readers should conduct their own research when making a decision.

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