Solana Stumbles as TVL Craters and Memecoin Mania Cools - Crypto Economy

TL;DR:

• Solana’s Total Value Locked (TVL) has fallen more than $10 billion from its peak of $15 billion in September.
• DEX activity decreased by 67% after the October crash, impacting Solana DApp revenues.
• SOL’s funding rate shows weak demand for bullish leverage, reflecting trader caution.

Over the past month, the SOL token has failed to sustain prices above $145. A marked decline in network activity, driven by lower demand for decentralized applications (DApps), is negatively impacting the outlook for Solana’s native token.

On-chain metrics are showing signs that user participation is cooling faster than expected, with the TVL drop being the main factor.

Solana’s Total Value Locked (TVL) has been in decline since reaching its all-time high of $15 billion in September. The decrease in smart contract deposits increases the immediately available SOL supply for sale. Concurrently, the weekly revenues from DApps on Solana have fallen to $26 million, down from $37 million recorded two months ago.

Furthermore, traders’ appetite for memecoins is also weakening, especially after the crypto market flash crash on October 10. Memecoins were a key driver for SOL, pushing Decentralized Exchange (DEX) volumes on Solana to $313.3 billion in January. DefiLlama data indicates that this activity has since dropped by 67%, partly explaining the softer revenue trends across Solana DApps.


Hopes for Recovery with Firedancer and Kamino

Despite the Solana TVL crash memecoins scenario, Solana shows some resilience compared to the broader market slowdown. While Solana’s network fees fell by 21% over the past 30 days, competing blockchains experienced steeper declines, such as BNB Chain with 67% and Ethereum with 41%. Additionally, the number of transactions on Solana increased by 6%.

Trader sentiment remains cautious. The annualized funding rate for SOL perpetual futures stood at 6% on Friday, showing weak demand for bullish leverage. This contrasts with the euphoria observed a few months ago and indicates that it will take time for bulls to rebuild conviction after SOL’s 46% price decline over three months.

On the other hand, Kamino, the second-largest Solana DApp by TVL, announced new products, including fixed-rate and fixed-term borrowing, and an institutional credit line backed by Bitcoin.

Despite these technical and ecosystem advancements, it is unclear whether they alone will restore the confidence needed to support a bullish trend that returns SOL to the $190 level seen two months ago.