Soul Rally Fizzles to $100 as Solana Competitors Rise

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SOL derivatives indicate bearish sentiment as the funding rate hits 0% and prices (sell) options.

While Solana leads in DX volume, it faces stiff competition from Hyperliquid in the perpetual contracts sector.

Solana's native token SOL (SOL) suffered a 3-day 11% decline after hitting $97.70 on Monday. Thursday's drop to $87 resulted in the liquidation of $25 million in leveraged long positions, weighing on trader sentiment. SOL derivatives are currently increasing the odds of a retest of the $80 level, indicating fears of further declines and a lack of conviction for bulls.

SOL Perpetual futures annualized interest rates hovered around 0% on Thursday, indicating a lack of long-term interest. Bears have dominated demand over the past month, which is highly unusual for crypto markets as traders are historically bullish. In addition, the cost of capital and exchange risks in neutral situations usually bring the funding rate up to 9%.

Professional traders of the SOL options market confirm that the $87 level is not suitable for long-term retention.

The delta skew (calls) jumped to 12% on Thursday, meaning put options traded relative to the corresponding call instruments. Whales and market makers are not comfortable holding low price exposure, even though SOL is trading 70% below its all-time high. Part of this depression can be explained by weak demand in the decentralized applications (DApps) industry.

Solana Daps' revenue fell to an 18-month low of $22 million, down from $36 million two months ago. At the same time, DApps revenue on the BNB Chain dropped by 52%, but competition in the perpetual contract business increased as HyperLiquid dominated the industry.

While Solana is a leader in decentralized exchange (DEX) volumes, led by Pump, Radium and Orca, the landscape in synthetics has changed. Blockchains designed to handle perpetual contract trading, such as Hyperliquid, Edgex, Zklighter and Aster, account for more than 80% of the total volume.

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Weak onchain data and bearish derivatives will delay SOL's price recovery.

The launch of a publicly licensed S&P 500 Index futures contract on Hyperliquid contributed to weak demand for SOL. Product offerings to eligible users outside the United States are made commercially.[XYZ] And it adds about $1.1 billion in assets to the total tokenized markets.

SOL's current market capitalization of $51 billion represents a 42% decline relative to competitor BNB's ( BNB ) $88 billion. However, Solana Network's Total Value Locked (TVL) stands at $6.9 billion, while BNB Chain is held at $5.7 billion TVL. More importantly, Solana's 30-day network payout totaled $20.8 million, while BNB Chain's payout was $9.1 million, according to Defillama data.

Several companies that have chosen a SOL-focused digital asset treasury strategy, such as Forward Industries (FWDI US) and DeFi Development Corp. (DFDV US) are underwater in their possession, adding to the negative feeling. Ultimately, the weakness in Solana onchain activity and the lack of enthusiasm in the derivatives markets hint that a bull run above $110 will take longer than expected.