Solana ($SOL ) failed to sustain its price above $200 after multiple rejections between December 25 and 26. The move mirrored the overall decline in the cryptocurrency market, with a 3.5% decline in the two days to December 28. However, SOL fell more sharply with a 5.1% correction, raising concerns among traders that the price could continue to decline.
One of the worrying factors is the transaction volume on the Solana network, which has dropped 30% over the past seven days.
Despite taking second place in weekly trading volume with $20.9 billion, Solana still saw the biggest drop among the top blockchains. Over the same period, Ethereum’s on-chain trading volume fell 15%, while Sui’s fell 8%. Ethereum’s ecosystem further solidifies its lead when factoring in layer-2 solutions like Arbitrum, Optimism, Base, and Polygon.
According to DefiLlama, Solana’s weekly DApp transaction volume also showed a negative trend. Notably, Orca and Phoenix saw a 39% decline in activity over the past seven days, while Raydium saw a 30% drop in activity. More worryingly, Solana’s memecoins, which attract new users, also performed poorly over the past 30 days. On-chain activity – including token issuance, staking, and trading – remains a key driver of demand for $SOL .
The top memecoins on SOL have seen sharp declines over the past 30 days, with Popcat down 42%, Dogwifhat (WIF) down 40%, and BONK down 25%. Meanwhile, the total cryptocurrency market cap has remained stable over the same period.
Note that the correction is not limited to Solana-based memecoins, with Raydium’s recent success also tied to the memecoin craze on pump.fun. 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. This 16% monthly increase was driven primarily by platforms such as Binance Staked SOL, Jupiter, Drift, and Orca, according to data from DefiLlama. However, Jito, Sanctum, and MarginFi saw a decline in deposits.
$SOL futures data shows strength despite price decline
In assessing whether professional traders are becoming negative on SOL, the derivatives market provides important information. For example, monthly futures contracts typically trade at a premium of 5% to 10% annually in neutral markets. This premium helps compensate sellers for the longer settlement times of these instruments.
While lower than the 20% spread recorded on December 18, the current 10% spread is still in the neutral to positive range. Considering SOL’s 16% decline over the same period, the derivatives market remains resilient.
To gauge retail traders’ sentiment, it is important to analyze SOL perpetual futures. Exchanges manage risk through funding rates, which are positive when buyers need more leverage and negative when sellers dominate.
Over the past month, SOL’s funding rate has remained below 0.015% – equivalent to an annualized interest rate of 1.2% – indicating a neutral market. However, on December 27, the rate turned negative, indicating that demand from leveraged long positions is decreasing. This change is concerning, as SOL has fallen 30% since its peak of $264.50 on November 20.
The sharp decline in Solana’s on-chain activity and the declining interest in memecoins point to a slightly bearish outlook for SOL’s price in the short term. However, data from the derivatives market shows that large investors and market makers remain bullish, suggesting that the downside risk below $180 is limited.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.