Is Solana's Price About to CRASH? The Warning Signs You Can't Ignore

The Solana (SOL) network has witnessed a significant drop in active addresses over recent months, even as the price of SOL has continued to rise.

This trend raises questions about the relationship between network engagement, investor sentiment, and market movements.

Decline in Solana Network Activity

Source: ali_charts on X

Market analyst Ali reported that the number of active addresses on the Solana network plummeted from 18.5 million in October 2024 to 8.4 million by February 2025—a sharp decline of more than 50%.

Despite this reduction in user participation, the price of SOL rose from $161.34 to $197.86 during the same period.

Network Activity Peaks Before Declining

Solana recorded its highest level of network activity on October 22, 2024, with 18.54 million active addresses. This period of heightened engagement corresponded with SOL’s price at $161.34, indicating a strong correlation between network usage and price movement.

However, by February 15, 2025, the number of active addresses had dropped to 8.37 million. This sharp decline suggests a change in user behavior and engagement with the Solana network, raising concerns about the sustainability of its growth.

Solana Price Gains Despite Decreasing User Activity

Interestingly, the price of SOL has continued to increase even as the number of active addresses declines. The rise to $197.86 by mid-February suggests that a smaller group of users is driving market activity.

This could indicate that large-scale investors and institutional players are influencing the price rather than retail users.

Read Also: Solana (SOL) Dips Amid LIBRA Controversy – Will It Recover?

Correlation Between Price and Network Growth

Historically, Solana’s price and network activity have been highly correlated. During October and November 2024, both metrics were on an upward trajectory, signaling strong market confidence.

However, in December, active addresses began to decline while SOL’s price faced resistance. This pattern suggests that trading activity may be concentrated among fewer users or driven by speculation rather than organic network growth.

Bearish Signals from Solana’s Technical Indicators

1. Relative Strength Index (RSI) and Money Flow Index (MFI)

Solana’s technical indicators currently show bearish trends. The Relative Strength Index (RSI) sits at 32.16, just above the oversold level of 30. A further drop below this level could be seen as a buy signal, but continuous selling pressure might lead to further declines.

Additionally, the Money Flow Index (MFI) is at 39.98, indicating low money flow out of SOL. This suggests weak momentum and could result in further price dips if investor sentiment does not improve.

2. Support and Resistance Levels

Key resistance levels for SOL are identified at $180 and $200, while support levels are at $170 and $160. If the RSI crosses above 40 and SOL’s price remains above $180, it could signal a potential recovery.

Declining Open Interest and Investor Participation

Source: the coin republic

Solana’s open interest has decreased by 2.23% over the past 24 hours, signaling reduced trader and investor participation. Perpetual open interest has also declined by 2.25%, further confirming weaker market engagement.

Data shows that most of Solana’s derivatives are traded on Binance ($1.1 billion), followed by Bybit ($819.3 million) and OKX ($382.5 million).

The concentration of open interest on these platforms suggests that major shifts in trader positioning on Binance and Bybit could significantly impact SOL’s price movements.

Read Also: DOGEN Token Analysis and Market Performance, Can it Go Up Again?

Market Sentiment and External Factors Impacting Solana

1. SOL’s Weekly Declines and Volume Reduction

Solana has remained in a bearish zone, registering weekly losses. Over the past four weeks, SOL has declined by a cumulative 38.35%, with the downward trend continuing at an 8.87% decline. At the time of writing, SOL is trading at $167.37.

AMBCrypto’s analysis suggests further potential price declines, as bearish sentiment continues to dominate the market.

2. Impact of Memecoin Activity on Solana’s Volume

Source: ali_charts on X

SOL’s trading volume has sharply declined across both centralized and decentralized exchanges. After reaching a peak of $2 billion in November, Solana’s total transfer volume has now plummeted to just $26 million.

This significant reduction in trading volume indicates waning interest in SOL’s ecosystem.

A major factor contributing to this decline is the fading hype around memecoins. The recent launch of the LIBRA token, which was reportedly linked to Argentine President Javier Milei, led to substantial selling pressure on SOL.

LIBRA initially surged to an all-time high of $4.563 before crashing to $0.336—a staggering 96.63% decline. Trading volume for LIBRA also dropped from $963.6 million to just $3.6 million.

A similar trend has been observed with other major memecoin listings, such as TRUMP and MELANIA. The rapid decline in trading volume suggests that many investors are liquidating their positions, further pressuring SOL’s price.

3. Additional Bearish Factors: Social Engagement and FTX Unlock

LunarCrush data indicates that Solana’s social engagement has dropped by 69%, reflecting reduced online discussions and community interest. This decline in sentiment further adds to selling pressure on SOL.

Furthermore, an upcoming FTX SOL unlock on March 1, 2025, is expected to introduce 11.2 million SOL into circulation. Increased supply, combined with already weak demand, could drive prices lower if investor sentiment does not improve.

The Launch of a New Stablecoin on Solana

Despite the current bearish trends, Solana’s ecosystem is still attracting new projects. Reeve Collins, one of Tether’s original founders, is launching a new stablecoin under the Pi Protocol.

The stablecoin is expected to launch on both Ethereum and Solana in the second half of 2025.

Unlike traditional fiat-backed stablecoins like USDT and USDC, the Pi Protocol stablecoin is likely to offer yield, potentially generated through tokenized real-world assets.

This approach is similar to projects like Ethena’s sUSDe and MakerDAO’s sDAI, which provide holders with yield-bearing synthetic dollars.

While the exact mechanism of the Pi Protocol stablecoin remains unclear, its launch could potentially bring more liquidity and activity to the Solana network in the future.

Read more about Solana (SOL):

How to buy Solana (SOL)

SOL to USD: Convert Solana to US Dollar

How to Stake Solana (SOL)

Trade Solana Futures

Conclusion: What’s Next for Solana?

Solana’s recent decline in network activity, combined with bearish technical indicators and decreasing trading volume, suggests a challenging period ahead. However, despite these bearish signals, SOL’s price has remained relatively resilient, supported by larger investors.

Going forward, investors should closely monitor key resistance and support levels, social engagement metrics, and the impact of the upcoming FTX SOL unlock.

If SOL manages to maintain support above $170 and open interest begins increasing, a potential price rebound could be on the horizon.

While short-term sentiment appears bearish, long-term developments, such as new stablecoin projects on Solana, could help revive network activity and investor confidence.

FAQ

1. Q: Why is Solana's price rising while its network activity is declining?
A: This divergence suggests that a smaller group of investors, potentially large-scale or institutional players, may be driving the price, rather than organic network growth and retail user participation.

2. Q: What does the decline in active addresses mean for Solana?
A: A significant drop in active addresses, like the 50% decrease seen recently, can indicate waning user interest and engagement with the network, raising concerns about the long-term sustainability of price growth.

3. Q: What are some of the bearish signals for Solana?
A: Several bearish indicators include a declining RSI, low MFI, reduced open interest, falling trading volume, decreased social engagement, and the upcoming FTX SOL unlock.

4. Q: What is the FTX SOL unlock, and how could it affect Solana's price?
A: The FTX SOL unlock refers to the release of 11.2 million SOL tokens into circulation. This increased supply could put downward pressure on the price if demand doesn't keep pace.

5. Q: What role have memecoins played in Solana's recent price action?
A: The hype and subsequent crash of memecoins like LIBRA, TRUMP, and MELANIA have contributed to selling pressure on SOL, as investors liquidate their positions in these volatile assets.

6. Q: What are the key support and resistance levels for Solana?
A: Key resistance levels are around $180 and $200, while support levels are around $170 and $160.

7. Q: What is open interest, and why is it important for Solana?
A: Open interest represents the total number of outstanding derivative contracts. A decline in open interest suggests reduced participation from traders and investors, which can impact price momentum.