Home Coin news Solana Price Falls Despite High Network Activity

Solana Price Falls Despite High Network Activity

18 Apr, 2024 Coin news

Solana Price Falls Despite High Network Activity

Solana's native cryptocurrency, SOL, has witnessed a significant downturn, falling 21% in the past week to reach its lowest level in nearly six weeks.

This drop in price resulted in a substantial $113 million in liquidations of leveraged long SOL futures contracts since April 11, which might indicate that investors were overly optimistic after SOL's 61% price surge in March.

The decline has led to concerns about the potential for further corrections and whether the $130 support level can be maintained.

Despite Solana's current market capitalization of $60 billion, which is considerably higher than Avalanche's $13 billion and Tron's $10 billion, some market observers believe the premium is justified by the rapid growth of Solana’s ecosystem and the launch of numerous projects on its platform.

On April 16, Coinbase announced that it had fully integrated its wallet with Solana's decentralized exchange (DEX) ecosystem, supporting over 50,000 Solana SPL tokens.

This integration is expected to simplify the trading process for users and reduce barriers to entry into the Solana ecosystem.

In terms of market dynamics, the open interest in SOL futures dropped 40% to $1.5 billion between April 12 and April 17, suggesting a decrease in demand for leverage.

The funding rate for SOL perpetual futures, a key indicator of market sentiment, has remained negligible since April 12, indicating a balanced interest between long and short positions despite SOL's price decline of 33% over the last 16 days.

Solana has also faced technical challenges recently. The network experienced severe congestion issues, leading to a transaction failure rate of up to 75%.

Developers have rolled out an upgrade to address these bottlenecks, although some projects have postponed their token launches until the network is more stable.

Further impacting Solana's ecosystem, setbacks in several notable projects have added pressure.

For instance, the resignation of Edgar Pavlovsky, CEO of MarginFi, on April 10 led to $190 million in withdrawals and accusations from other Solana-based projects of failing to release credits to users.

In the decentralized finance (DeFi) sector, tokens like Jito (JTO), Raydium (RAY), and Jupiter (JUP) saw significant declines of 29%, 24%, and 27% respectively since April 12.

Additionally, popular Solana memecoin Dogwifhat (WIF) experienced a steep 32% drop over six days.

Analysts are closely watching Solana’s DApp activity, as the usage of decentralized applications tends to drive demand for SOL due to network usage fees and participation in SPL token airdrops.

This underlying utility and activity may play a crucial role in SOL's future price movements.

Sources:

https://cointelegraph.com/news/solana-price-takes-another-tumble-can-sol-hold-above-130

https://twitter.com/CoinbaseWallet/status/1780297256370946124

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