Solana’s native token, SOL (SOL), saw a 9% decrease on January 18th, dropping to a low of $91.40. The persistent rejection from the $100 level over the past 15 days should not be a cause for major concern, considering that the total cryptocurrency market capitalization has been unable to maintain levels above $1.6 trillion throughout 2024. Despite the recent setback, SOL experienced an impressive 84% gain in December, leading investors to express worries about the lack of positive price momentum.
The fear of missing out (FOMO) that fueled SOL’s rally in December 2023 was driven by the surge of Solana SPL token airdrops, which included Jito (JTO), BONK, and Dogwifhat (WIF). This movement increased demand for the Solana Saga Phone, as some projects offered exclusive deals to these users. However, the tide seems to have turned, as BONK underwent a 15% correction between January 17th and 18th, while JTO declined by 19% in the same period.
Another contributing factor to SOL’s recent correction was the excessive optimism surrounding airdrop expectations. Some launches took longer than expected, while others only provided a temporary boost to its decentralized applications (DApps), which faded after the airdrop snapshots. Analysts and influencers created lists of the most promising opportunities, but few of the tokens achieved significant valuations and volumes.
In a post on the X social network dated December 12th, 2023, IcedKnife mentioned some of the anticipated launches in the Solana ecosystem, including Kamino, Drift, Tensor, Jupiter, Parcl, Marginfi, and many others.
One significant source of optimism for SOL’s token performance comes from the growth in deposits within the Solana Network’s decentralized finance (DeFi) industry.
The total value locked (TVL), measured in SOL tokens, reached a peak of 15.4 million on December 19th, 2023, indicating a 60% growth compared to the previous month. However, it has since stabilized around 14 million. In addition to the TVL growth in Jito and Marinade Finance liquid staking solutions, Kamino, Orca, and Solend DeFi applications have also surpassed $150 million in deposits each.
Furthermore, there has been undeniable growth in the activity of the Solana network in terms of transactions and volumes, although it still lags behind competitors like BNB Smart Chain and Polygon.
It should be noted that Solana experienced an 8.5% decline in transactions and the number of active DApps users in the last seven days. However, Solana’s DApps volume in the same period, totaling $594 million, is significantly smaller compared to BNB Smart Chain’s $6 billion or Polygon’s $1.6 billion. On the positive side, Solana leads in terms of the absolute number of transactions at 72.3 million, which can be partially attributed to its lower costs.
Solana’s network strength provides a pathway for a potential SOL price recovery.
Solana has faced criticism for its heavy reliance on heavy-processing validation, but it has also presented an opportunity for DApps that require extensive bandwidth, such as token launches, non-fungible token (NFT) collections, games, and social networks. In fact, the Solana network has become the third-largest network in terms of NFT marketplace volumes, according to CryptoSlam.
NFT volumes on Solana reached $270.5 million, trailing Ethereum by only 20%, with Ethereum dominating in terms of the most valuable collection. Some notable NFTs traded on Solana include Saga Monkes, Froganas, Mad Lads, and Tensorians.
Solana’s network activity does not indicate a risk of a significant SOL price correction, considering its resilience in terms of DApps volumes and TVL. However, there is negative pressure on SOL token demand due to excessive expectations surrounding airdrops and SPL token performances.
Currently, SOL’s market capitalization stands at $40.6 billion, with a price of $94, which is still 50% lower than its peak in November 2021.
As a result, there is potential for an upside if the network continues to attract interest from projects that value its stability in the face of high network processing demand. This is particularly significant as many competitors have experienced surges in transaction fees or prolonged instability.
This article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making a decision.