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Will Solana Price Hold at $180 After 30% Drop in Weekly DApp Volumes?
Declining network activity and interest in memecoins weighed on Solana’s price, but derivatives data suggests a limited downside.
Solana’s native token, SOL failed to sustain levels above $200 after multiple rejections between Dec. 25 and Dec. 26. This move was in line with the broader cryptocurrency market, which saw a 3.5% drop in two days until Dec. 27. However, SOL underperformed with a 5.1% correction, raising concerns among traders about potential further price declines.
A key source of concern was Solana’s onchain network volumes, which fell by 30% in seven days.
Despite taking second place in weekly volumes with $20.9 billion, Solana performed the worst among the top 10 blockchains. In comparison, Ethereum’s on-chain volumes fell by 15%, while Sui saw an 8% decline. Moreover, the Ethereum ecosystem consolidated its lead when taking into account layer-2 solutions such as Arbitrum, Optimism, Base, and Polygon.
Solana’s weekly DApp volumes, as tracked by DefiLlama, also reflected negative trends. Highlights include a 39% decline in Orca and Phoenix activity over seven days, while Raydium activity fell by 30%. More worryingly, memecoins on Solana, which have been a major draw for new users, saw poor performance over 30 days. On-chain activity (spanning token launches, staking, and trading) remains a crucial driver of SOL demand.
Among meme coins, Popcat fell 42% in the 30 days leading up to Dec. 27, Dogwifhat (WIF) fell 40%, and BONK fell 25%. In contrast, the total cryptocurrency market cap remained stable over the same period.
It is worth noting that the correction was not exclusive to Solana-based memecoins, but rather Raydium’s recent success was strongly tied to the pump.fun memecoin frenzy. These challenges underscore the importance of maintaining on-chain activity to maintain demand for SOL.
Total deposits on the Solana network, as measured by total value locked (TVL), hit a two-year high of 44 million SOL. The 16% monthly increase was driven by platforms such as Binance Staked SOL, Jupiter, Drift, and Orca, according to data from DefiLlama. On the downside, Jito, Sanctum, and MarginFi saw a decline in deposits.
SOL futures show resilience despite price decline
To assess whether professional traders have turned bearish on SOL, the derivatives market offers key information. For example, monthly futures contracts typically trade at a 5% to 10% annualized premium in neutral markets. This premium compensates sellers for the longer settlement periods associated with these instruments.
While lower than the 20% premium recorded on December 18, the current 10% premium is on the threshold of neutral to bullish sentiment. Considering SOL’s 16% price drop over the same period, the derivatives market has shown resilience.
To assess retail traders’ sentiment, it is essential to analyze SOL perpetual futures. Exchanges manage risk through funding rates, which turn positive when buyers require additional leverage and negative when sellers dominate.
Over the past month, SOL’s funding rate has remained below 0.015% (equivalent to 1.2% annualized), indicating a neutral market. However, on December 27, the rate turned negative, indicating lower demand for leveraged long positions (buyers). This change is concerning, given that SOL has declined 30% from its all-time high of $264.50 on November 20.
The sharp decline in Solana on-chain activity and waning interest in memecoins suggest a moderately bearish outlook for SOL price in the near term. Despite this, derivatives data indicates that whales and market makers remain bullish, suggesting a limited risk of a drop below $180.