Why is Solana (SOL) price down today?

Solana's native token SOL (SOL) experienced an impressive 58.6% increase in five days, reaching a high of $64 on November 11. However, the two-day rebound of 11.3% to $54 has investors questioning whether this is a sign. A fading bullish movement or temporary price correction.

To put SOL's performance into context, it can be compared to other leading altcoins. Since its November 11 peak, Avalanche's AVAX (AVAX) has gained 17%, Ether (ETH) has gained 1%, and BNB (BNB) is down 2%. This comparison emphasizes that SOL is an underperformer in the broader altcoin market. Therefore, the 5.5% daily decline on November 13 is unlikely to be tied to macroeconomic or sector drivers, such as the approval of a spot BTC exchange-traded fund.

Solana remains a top competitor in terms of performance and chain mobility.

Despite the recent decline in SOL's price, the seven-day gain of 35% suggests that investors should not take a hasty view, as this could only be a natural correction following Solana's significant performance. However, it is important to ignore the fundamentals of the Solana network, which include chain metrics and SOL derivatives markets. Excessive leverage by traders can lead to forced liquidations, especially in perpetual contracts or reverse swaps, where liquidity plays a critical role.

Perpetual contracts, also known as reverse swaps, typically contain an embedded rate that pays out every eight hours. A positive funding rate indicates that long (buyers) want to gain more leverage, while in the opposite case, short (sellers) need more leverage, which leads to a negative funding rate.

The seven-day SOL funding volume correlates with Bitcoin (BTC) and ETH, indicating a slightly higher long-term demand. The weekly cost of 0.4% is normal, the market capitalization of the cryptocurrency has grown by 10.5% in the last two weeks, reaching $ 1.4 trillion, the highest level since May 2022.

Analyzing on-chain data from semi-centralized networks with very low transaction fees naturally poses risks, as it is relatively easy to add these metrics, especially related to decentralized finance. A case in point is the revelation in August 2022 by a former developer from Saber, Solana, an already respected decentralized exchange, that a significant portion of the app's Total Value Locked (TVL) used double counting.

Data providers have modified their services to prevent such apparent scale inflation. Currently, Solana's TVL stands at $535 million, which is a big number but modest compared to its closest competitors.

Despite Solana's impressive market capitalization of $22.7 billion, it's noteworthy that Solana's TVL ranks behind Avalanche's $614 million. Similarly, Polygon's TVL is $840 million and MATIC's market cap is $8.2 billion, highlighting the difference.

In addition, Solana's accumulation of $660,000 in visible date payments does not appear to warrant future interest in SOL. Although this number has increased significantly, it has increased by 3.7% in the last 90 days, which will be less than the increase in the token supply, which increased by 65 million dollars per week.

In addition to the formal exit from SOL, there is a vetting program associated with the failed FTX exchange and Alameda Research. In September 2023, bankruptcy estates are allowed to sell digital assets up to $100 million per week, including 55.75 million SOL.

NFT data shows that Solana is a top competitor

Solana's presence as a strong player in the nonfungible token (NFT) market was one of its selling points, the leading blockchain in terms of the high cost of issuing and maintaining collections on Ethereum. However, this advantage was not enough to attract high-value commodities and whales to Solana's NFT markets.

RELATED: China declares stealing digital collectibles like NFTs punishable by felony theft.

While the seven-day average transaction fee on the Ethereum network has risen to $7.6, the total weekly NFT volume is more than seven times that of Solana. This data highlights that investors and innovators think about things beyond transaction costs. However, Solana maintains a significant position in the market, with the leaders, Bitcoin and Ethereum.

Although the SOL price was adjusted by 5.5% on November 13, it does not necessarily indicate a reduction in net activity or interest in using futures contracts. However, it shows that investors have noticed SOL's market capitalization compared to its peers. The extent of this correction is uncertain.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.