Solana Price Takes Another Fall – Can SOL Hold Above $130?

Solana's native token SOL (SOL) has seen a significant 21% drop over the past week, hitting a six-week low. The decline resulted in $113 million in liquidations of long SOL futures contracts used since April 11, suggesting investors may have been overly optimistic following SOL's 61% price increase in March.

This raises questions about further corrections and whether the $130 support level will hold.

The development of the Solana ecosystem and the integration of Coinbase

According to market analysts, Solana's $60 billion capitalization is four to six times higher than Avalanche's (AVAX) $13 billion and Tron's (TRX) $10 billion. However, some argue that the premium is due to the rapid expansion of the Solana ecosystem and many projects launching their own tokens.

On April 16, Coinbase announced that its wallet is now fully integrated with the Solana Decentralized Exchange (DEX) ecosystem and supports more than 50,000 Solana SPL tokens. This integration simplifies the transaction process by allowing users to enter the contract address directly into the “swap flow”, thereby reducing barriers to entry into the Solana ecosystem.

Between April 12 and April 17, open interest in SOL futures fell by 40% to $1.5 billion, indicating a reduction in demand. Analyzing SOL's future funding volume may shed light on whether this decline is primarily due to reduced interest in long positions.

Funding volume for SOL perpetual futures is often used as a measure of market sentiment. A positive rate indicates a preference for leveraged long positions, while a negative rate indicates a preference for shorts, a bet on the downside.

Since April 12, funding for SOL futures has been flat, suggesting balanced demand between long and short positions. This data is somewhat reassuring as SOL's price has fallen 33% over the past 16 days, and is set to close below $136 for the first time since March 6.

Recent network congestion has not stopped Solana DApps activity.

The Solana network has recently experienced serious congestion issues, with a failure rate of up to 75% of transactions, according to Cointelegraph. In response, developers have introduced improvements aimed at addressing these bottlenecks. This issue has caused several projects to delay their token launches until these network challenges are fully resolved.

Adding to the pressure on SOL's performance were setbacks in several prominent projects such as MarginFi. On April 10, the CEO of Marginfi, Edgar Pavlovsky, resigned, which led to the withdrawal of about 190 million dollars. The controversy escalated when other Solana-based projects accused MarginFi of not providing credit to users. This situation highlights the dynamics and challenges in the Solana ecosystem.

Despite the underlying reasons, the decline in Solana SPL tokens has been seen across the board. In the decentralized finance (DeFi) sector, JETTO ( JETTO ) has fallen 29% since April 12, while Radium ( RAY ) and Jupiter ( JUP ) have recorded declines of 24% and 27% respectively. In addition, popular Solana memecoins, including DogwhipHat (YFF), have seen a 32 percent drop in a six-day period.

Analysts consider Solana's DApp activity to be indicative of SOL's price movement, as the use of decentralized applications will increase demand for SOL. This demand is generated from network usage fees and participation in SPL token airdrops.

Related: Memecoins are making millionaires, but are they really good for crypto?

The latest Dapradar data shows that Solana's DApp volumes jumped 60% to $1.3 billion last week, outperforming its competitors. During the same period, Ethereum showed a 20% increase in activity, while BNB Chain showed a 13% increase. Despite these gains, Solana's active user count has remained stable at around 2 million, despite a 4% decline in Ethereum network active addresses.

With stable usage demand in futures markets coupled with strong on-chain activity, there is no indication that SOL will lag behind the broader altcoin market. However, continued network congestion may challenge the sustainability of Solana's premium price compared to other blockchain tokens.

This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.