Solana Price Plummets 50%: What’s Behind the Major Decline?

Solana Price Plummets 50%: How It Affects SOL’s Value

Solana Price Plummets 50% – Solana (SOL) has experienced a significant price drop, losing 50% of its value since hitting an all-time high of $295 on January 19. February’s 42% drawdown marks the largest monthly decline since November 2022, when the FTX exchange collapsed. While external factors like the 11.2 million token unlock and the LIBRA memecoin scandal may have contributed to the downturn, there are underlying fundamental reasons that explain the recent correction.

Solana’s TVL Sees a $5 Billion Drop

Since reaching a record high of $10 billion in total value locked (TVL) in January, Solana’s TVL has plummeted. After peaking at $12 billion, it has fallen to $7.13 billion. DefiLlama data indicates that Raydium, one of Solana’s leading decentralized applications, saw a massive 60% drop in TVL in less than a month. Other prominent decentralized applications such as Jupiter DEX, Jito Liquid Staking, and Kamino Lending also experienced significant declines, of 25%, 46%, and 33%, respectively. This dramatic drop in TVL has directly impacted Solana’s on-chain volumes, which have fallen from $97 billion in weekly volume in January to just $7 billion this week.

Liquidity Shifts to Ethereum and Arbitrum

The decline in Solana’s price and activity has caused traders to move their liquidity elsewhere. In the past 30 days, nearly $500 million has been bridged to other blockchains, with Ethereum, Arbitrum, and Sonic seeing notable inflows. According to crypto analyst Miles Deutscher, Solana’s fee burn dropped to a monthly low of $177,000, highlighting the reduced activity and waning interest in the network.

Memecoin Market Collapse Affects Solana’s Valuation

At its peak in December 2024, the memecoin market on Solana reached a market cap of $25 billion. However, the market cap has now plummeted to $8.3 billion, with a 23% drop in the past 24 hours. Many of the memecoins launched on Pump.fun have lost 80% to 90% of their value, further affecting Solana’s perceived valuation. Although SOL itself is not a memecoin, the rise and fall of memecoin tokens have impacted its overall market sentiment.

In summary, Solana faces a tough road ahead, with declining activity, shifting liquidity, and a broader decline in market sentiment. These factors have contributed to the sharp price correction over the past month.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.