Solana, a high-performance blockchain platform, has seen its native token SOL plummet more than 40% over the past month. The decline can be attributed to a combination of factors that one analyst referred to as a “perfect storm.”
Aran Hawker, CEO of a cryptocurrency analytics firm, explained, “Solana’s recent 40% price drop can be attributed to multiple converging factors. The meme coin frenzy that once fuelled excitement has cooled, leading to declining investor confidence.
Additionally, on-chain activity has plummeted, with active addresses and transaction volumes sharply decreasing.”
Blockchain analyst Ali (@Ali_charts) shared a Glassnode graph on X (formerly Twitter) showing that the number of active addresses on Solana dropped from more than 18.5 million in late October to less than 8.4 million by February 15. Joe DiPasquale, CEO of a cryptocurrency hedge fund manager, highlighted the impact of recent issues involving the LIBRA coin, a project that quickly amassed a market capitalization of $4.5 billion before losing 90% of its value. Argentina’s President Javier Milei had initially endorsed this digital asset via a post on X, which he later deleted.
DiPasquale claimed this undermined investor confidence in Solana-based projects. Another major factor contributing to the bearish pressure on SOL prices is the impending March 1 token unlock, which will result in the release of over 11 million SOL tokens into circulation. Hawker added, “The looming unlock has raised fears of oversupply, further pressuring the market.
We have seen an influx of institutions swapping out SOL for ETH in anticipation of this pressure.”
Solana’s association with high-profile scams has also damaged its reputation, adding to the bearish sentiment. TikTok influencer Wendy O offered a different perspective, focusing on Bitcoin’s price action and the LIBRA situation’s impact on other digital currencies. She noted that Solana’s peak of approximately $294 in January 2025 coincided with Bitcoin’s price action.
“Unfortunately, the Argentina Memecoin LIBRA debacle that exposed some bad actors and builders on the Solana blockchain has impacted the entire industry.
Solana’s significant decline in activity
The USA still does not have clear guidelines on crypto, despite President Trump’s executive order, and this incident can be compared to the fall of FTX regarding sentiment,” Wendy O said.
Onchain activity on Solana, which peaked at $35.5 billion in daily volume on Jan. 17, dropped sharply to $3.1 billion by Feb. 17.
This surge was initially driven by market hype. Despite Solana’s 20% weekly decline in DEX volume, some competitors like BNB Chain saw growth, surpassing Solana as the market leader. Deposits on Solana’s DApps, measured by total value locked (TVL), have also underperformed competitors.
Solana network saw a 19% drop in TVL over two weeks, primarily due to net outflows from projects like Jito, Kamino, Marinade Finance, and Sanctum. In comparison, Ethereum’s TVL declined by just 2%, while BNB Chain grew by 8%. Another source of concern for SOL holders is the expected unlocking of over 15 million SOL, worth more than $2.5 billion, in the first quarter of 2025.
This influx represents 12 times the amount unlocked in the previous quarter and has contributed to a bearish market sentiment. Ultimately, SOL’s underperformance can be attributed to a drop in onchain trading activity and a decrease in DApps TVL, trends that were evident before the market events on Feb. 14.
Additionally, the anticipation of large SOL unlocks created negative sentiment, pushing the token’s price to its lowest levels since November 2024.