Solana’s native token, SOL, has experienced a 13% decline over the past week, causing it to fall behind the top 3 contenders in terms of market capitalization. This drop in price has raised concerns among investors that the peak demand for SOL may have passed as the airdrop frenzy subsides. When comparing the activity on the Solana network to other blockchains, the outlook appears to favor bearish momentum.
One factor contributing to SOL’s price correction is the poor performance of the Solana SPL tokens, including Jito (JTO), Jupiter (JUP), and Dogwifhat (WIF), which have all seen significant declines since February 19. This has negatively affected investors who were hoping to profit from potential airdrops, as future listings are often priced based on existing alternatives.
However, the demand for SOL is not solely reliant on airdrops, as there are numerous decentralized applications (DApps) already running on the network. For example, the decentralized exchange Raydium had over 172,000 active addresses in the past week, while the NFT marketplace Magic Eden attracted over 167,000 addresses in the same period.
Despite these DApps’ popularity, when comparing Solana’s network activity to that of competing chains, the recent performance has been suboptimal. In the week leading up to February 21, Solana’s DApp volumes totaled $813 million, significantly lower than Polygon’s $2.9 billion and BNB Chain’s $5.2 billion. Additionally, while Ethereum and BNB Chain saw 14% and 27% gains in the number of active addresses, respectively, Solana only experienced a 5% increase.
However, there are still positive indicators for SOL investors. The total value locked (TVL) on the Solana network, which measures the amount of SOL deposited on DApps, reached its highest level since November 2022 at 37.7 million SOL on February 17. This represents a 13.5% increase compared to the previous month, suggesting that the overall demand for SOL has risen regardless of airdrop expectations. Furthermore, the high staking rate of 67.3% indicates that holders are not concerned about the recent price correction and are less likely to sell in the short term.
Another source of optimism for Solana investors is the integration with Filecoin, a decentralized storage solution. This partnership addresses the issue of historical data availability, as the records exceed 250 terabytes of storage. The previous solution using Google Cloud’s BigQuery platform did not align with the values of some DApps users and developers.
However, despite these positive developments, it becomes increasingly difficult to justify Solana’s $44.6 billion market capitalization when compared to networks like Polygon and Arbitrum, which have more active users and higher volumes. Polygon’s market cap is $8.8 billion, while Arbitrum’s is just $2.3 billion. While this data doesn’t necessarily indicate further price correction for SOL, it does provide less incentive for bullish investors to maintain levels above $100.
It’s important to note that this article does not provide investment advice or recommendations. Investing and trading involve risks, and readers should conduct their own research before making any decisions.