Solana’s native token SOL failed to sustain above $200 after being rejected multiple times between December 25 and 26. The move was in line with the broader crypto market, which saw a 3.5% decline in the two days ending December 27. However, SOL lagged with a 5.1% correction, raising concerns among traders about the possibility of further declines.
A major concern is the on-chain network volume of Solana, which has decreased by 30% over the past seven days.
Blockchains ranked by DApps volume in 7 days, USD. Source: DefiLlama
Although holding the second position in weekly volume at $20.9 billion, Solana performed the worst among the top 10 blockchains. Additionally, Ethereum's on-chain volume decreased by 15%, while Sui dropped by 8%. Furthermore, Ethereum's ecosystem solidifies its leading position when including layer-2 solutions like Arbitrum, Optimism, Base, and Polygon.
Weekly DApps volume of Solana, USD. Source: DefiLlama
Weekly DApp volume of Solana, tracked by DefiLlama, also reflects a negative trend. Notably, there was a 39% decrease in activity from Orca and Phoenix over the past seven days, while Raydium's activity dropped by 30%. More concerning, memecoins on Solana, which had attracted many new users, also performed poorly over the last 30 days. On-chain activity—ranging from Token issuance, staking, and trading—remains a key factor driving demand for SOL.
Among memecoins, Popcat decreased by 42% over the 30 days ending December 27, Dogwifhat (WIF) fell by 40%, and BONK dropped by 25%. In contrast, the overall cryptocurrency market capitalization remained stable during the same period.
Notably, the correction is not limited to Solana-based memecoins, but the recent success of Raydium has been closely linked to the memecoin pump.fun frenzy. These challenges underscore the importance of maintaining on-chain activity to sustain demand for SOL.
Total deposits on the Solana network, measured by total value locked (TVL), reached a two-year high of 44 million SOL. The monthly increase of 16% was driven by platforms such as Binance Staked SOL, Jupiter, Drift, and Orca, according to DefiLlama data. Conversely, Jito, Sanctum, and MarginFi saw a decrease in deposits.
SOL futures show resilience despite price declines
To assess whether professional traders are becoming bearish on SOL, the derivatives market provides important insights. For example, monthly futures typically trade at a spread of 5 to 10% when neutral. This spread compensates sellers due to the longer settlement time associated with these instruments.
Yearly spread of three-month SOL futures. Source: Laevitas.ch
Although lower than the 20% spread recorded on December 18, the current 10% spread marks a shift in sentiment from neutral to optimistic. Considering SOL's price decline of 16% during the same period, the derivatives market has shown resilience.
To gauge retail trader sentiment, it's necessary to analyze SOL's perpetual futures. Exchanges manage risk through funding rates, which become positive when buyers need more leverage and negative when sellers dominate.
Funding rate every 8 hours for SOL futures. Source: Coinglass
Over the past month, SOL's funding rate has remained below 0.015%—equivalent to an annual interest rate of 1.2%—indicating a neutral market. However, on December 27, this rate turned negative, signaling decreased demand from leveraged buyers. This shift is concerning, as SOL has dropped by 30% since its all-time high of $264.50 on November 20.
The significant decline in Solana's on-chain activity and the waning interest in memecoins evoke a rather pessimistic outlook for SOL's short-term price. Nevertheless, derivatives data suggests that whales and market makers remain optimistic, implying that downside risks below $180 are limited.
