Solana (SOL) has been unable to maintain a price above $200 after multiple rejections from December 25 to 26. This trend reflects the overall decline of the cryptocurrency market, with a decrease of 3.5% over two days as of December 28. However, SOL dropped even more sharply with a 5.1% correction, raising concerns among traders about the possibility of further price declines.
One concerning factor is that the trading volume on the Solana network has decreased by 30% over the past seven days.
Blockchain ranked by 7-day DApp volume, USD | Source: DefiLlama
Despite ranking second in weekly trading volume with $20.9 billion, Solana has seen the largest decline among leading blockchains. At the same time, Ethereum's on-chain trading volume fell by 15%, while Sui decreased by 8%. The Ethereum ecosystem further solidifies its leading position when considering layer-2 solutions like Arbitrum, Optimism, Base, and Polygon.
Weekly Dapp volume of Solana, USD | Source: DefiLlama
According to DefiLlama, Solana's weekly DApp trading volume also shows a negative trend. Notably, there was a 39% decline in activity on Orca and Phoenix in the past seven days, while activity on Raydium dropped by 30%. More concerning, memecoins on Solana, which attract new users, have also underperformed in the past 30 days. On-chain activity – including token issuance, staking, and trading – remains a key factor driving demand for SOL.
Top memecoins on SOL have seen a sharp decline over the past 30 days, with Popcat down 42%, Dogwifhat (WIF) down 40%, and BONK down 25%. Meanwhile, the total market capitalization of cryptocurrency has remained stable during the same period.
Note that the correction is not limited to memecoins on the Solana platform, as the recent success of Raydium is also linked to the memecoin craze on pump.fun. These challenges highlight the importance of maintaining on-chain activity to sustain demand for SOL.
The total deposits on the Solana network, measured by total value locked (TVL), have reached a two-year high of 44 million SOL. This 16% monthly increase primarily comes from platforms like Binance Staked SOL, Jupiter, Drift, and Orca, according to data from DefiLlama. However, Jito, Sanctum, and MarginFi have recorded a decrease in deposits.
SOL futures data shows strength despite the price drop
To evaluate whether professional traders have become negative about SOL, the derivatives market provides important information. For example, monthly futures contracts typically trade with a spread of 5% to 10% annually in neutral markets. This spread compensates sellers due to the longer settlement time of these instruments.
Monthly futures contract premium for SOL | Source: Laevitas.ch
Although lower than the 20% spread recorded on December 18, the current spread of 10% remains at a neutral to positive level. Considering the 16% drop of SOL during the same period, the derivatives market still shows resilience.
To assess the sentiment of retail traders, analyzing the perpetual futures of SOL is very important. Exchanges manage risk through the funding rate, which is positive when buyers need more leverage and negative when sellers dominate.
Funding rate for 8 hours of SOL futures | Source: Coinglass
Over the past month, SOL's funding rate has consistently 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, indicating that demand from leveraged long positions is decreasing. This change raises concerns, as SOL has dropped 30% since its peak of $264.50 on November 20.
The sharp decline in Solana's on-chain activity and the decreased interest in memecoins indicate a slightly negative outlook for SOL prices in the short term. Nevertheless, data from the derivatives market shows that large investors and market makers still maintain a positive outlook, suggesting that the downside risk below $180 is limited.
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