Solana (SOL) surged 16.4% from September 18 to 20, but the $152 resistance proved stronger than expected, resulting in a 6% drop to the current $143.
Investors are now questioning what is causing the weakness in the price of SOL and whether the recent withdrawals from deposits on the Solana network signal a retest of the $120 support level.
The recent gains in SOL price come after a broad altcoin market rally, with an 11% increase since September 18, fueled by the US Federal Reserveâs decision to cut interest rates.
This shift to a more dovish monetary policy also sparked a rally in the S&P 500 stock index, which hit an all-time high on September 19.
However, SOL's price gains appear to have been driven more by macroeconomic factors than any specific developments within the Solana ecosystem.
When looking at SOLâs performance, the recent drop to $143 has outpaced the broader correction in the altcoin market.
The lackluster investor reaction may be partly due to withdrawals from the Solana network, as measured by total value locked (TVL). However, other metrics suggest strong activity, likely offsetting the withdrawals.
The TVL of Solana decentralized applications (DApps) decreased by 8.5%, from 36.9 million SOL on September 18 to 33.8 million SOL on September 21.
These withdrawals have affected major platforms, including Jito (staking solution), Kamino (lending and leverage platform), and Jupiter (decentralized exchange). Notably, this is a reversal after a strong performance in August.
Still, Solanaâs decline appears to be less concerning than other blockchains. For example, Ethereumâs (ETH) TVL fell 5% in ETH, while Avalancheâs (AVAX) deposits hit a six-week low in AVAX.
Additionally, according to DefiLlama, trading volume on Solanaâs decentralized exchanges increased by 19% in the seven days ending September 23.
Positive trends in Solana network DEX trading volume include a 20% increase in Orca, a 28% increase in Raydium, and a 16% increase in Phoenix.
Meanwhile, Ethereum's most active DEX, Curve Finance, remained flat with $868 million in seven-day trading volume, and Tron's SUN fell 12% to $415 million over the same period.
Solana's On-Chain Metrics Show Strong Growth in Activity
However, assessing a network's performance based solely on deposits and transaction volume may not provide a comprehensive picture, as many decentralized applications (DApps) do not require significant deposits.
This includes areas such as collectibles, non-fungible token (NFT) markets, social apps, gambling platforms, and Web3 infrastructure. As such, analysts often track the number of active addresses as an indicator of user engagement.
Solana leads the market in terms of seven-day active addresses, according to data from DefiLlama. However, its 8% increase in this metric puts it behind Ethereum, which leads in terms of total value locked (TVL).
Solana's low fees provide an advantage in transaction costs, but also result in a relatively higher inflation rate to cover the costs and investments of validators.
In this context, Solana's seven-day transaction fee revenue reached $3.04 million, compared to Ethereum's $15.6 million and Tron's $9.72 million, according to DefiLlama.
Therefore, despite the recent 8.5% decline in TVL, the growth in DEX trading volume and active addresses suggests that Solana investors have nothing to worry about. On-chain data does not suggest a significant correction to the $120 level is approaching.
This article is for general information purposes only and is not intended to be legal or investment advice.
The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Us.
