Solana’s On-Chain Activity Drops as Price Signals a Potential Rebound

Solana has seen a significant decline in on-chain revenue, with earnings plunging by 93 % in two months. 

The network’s revenue peaked at $55.3 million in mid-January but has since dropped to just $4 million. This decline has been driven largely by fading interest in memecoins, which previously accounted for most of Solana’s transaction volume.

At the same time, Solana’s total value locked (TVL) has dropped from $12 billion to $6.4 billion, signaling a broader reduction in network activity. 

The memecoin frenzy that propelled Solana’s growth earlier this year has cooled, affecting revenue streams from trading platforms like Pump.fun.

Despite these setbacks, technical indicators and on-chain data suggest that SOL may be primed for a rebound. 

Whale accumulation, increasing open interest, and bullish divergences on the charts indicate that Solana could see an upward move in the coming weeks. The question remains whether this is a temporary relief rally or the beginning of a more sustained recovery.

Memecoin Trading Declines, Weakening Solana’s Revenue

The rise and fall of memecoin trading on Solana have had a profound impact on the network’s revenue. 

Earlier this year, speculative token trading generated nearly 80 % of Solana’s earnings. Platforms like Pump.fun saw daily revenues peak at $15 million as traders rushed to capitalize on the hype surrounding Solana-based memecoins.

This trend was amplified by the launch of high-profile tokens such as TRUMP and MELANIA, inspired by former President Donald Trump and his wife Melania Trump. 

These tokens initially saw strong trading volumes but later suffered severe price collapses. TRUMP tokens fell by 86%, while MELANIA tokens plunged by 95%, leading to a rapid decline in Solana’s overall trading activity.

As a result, weekly revenue dropped sharply, reducing transaction fees and slowing network activity. 

The speculative frenzy that had once driven Solana’s rapid growth has now faded, leaving a significant gap in on-chain revenue. This highlights Solana’s heavy reliance on memecoin trading as a source of network earnings, a vulnerability that has now been exposed.

Read more: Solana (SOL) Price Prediction 2024-2030

Whale Sell-Offs Contribute to Market Pressure

Adding to Solana’s challenges, recent whale sell-offs have intensified downward pressure on SOL’s price. 

^{Source: Lookonchain}

A major investor recently sold 108,688 SOL for $12.2 million USDC at an average price of $112.3 per SOL, incurring a substantial loss of $7.48 million. The whale originally acquired these tokens 11 months ago when SOL was trading at $181, reflecting a significant markdown.

This large-scale liquidation coincided with broader market weakness, triggering concerns about further selling by large holders. The transaction suggests that some investors may be cutting their losses amid waning confidence in Solana’s short-term prospects.

These sales have also impacted market liquidity, raising the risk of additional price declines if other whales follow suit. Given the sharp drop in Solana’s revenue and TVL, the network’s ability to retain capital inflows remains a critical factor in determining future price movements.

Despite this, not all whale activity has been negative. Data from spot inflow and outflow metrics shows that $60 million worth of SOL tokens have left exchanges in the past 24 hours. 

This trend suggests that some investors are accumulating SOL, reducing immediate sell pressure and potentially setting the stage for a price recovery.

Technical Indicators Signal a Potential Price Rebound

Despite declining on-chain activity and whale sell-offs, technical indicators suggest that Solana may be preparing for a rebound. 

The asset is currently trading at $126, reflecting an 8% increase in the past 24 hours. Trading volume has also surged by 25%, indicating renewed interest among traders.

A key bullish signal is the formation of a bullish divergence on the daily chart. This occurs when the price forms a lower low while the Relative Strength Index (RSI) makes a higher high, suggesting that selling momentum is weakening and buyers are gaining control. Historically, this pattern has preceded strong upside movements in the price of SOL.

Read more: Is Solana's Price About to CRASH?

If Solana can hold above the critical $120 support level, technical analysts predict a potential rally of up to 42%, which could push the price back to $180 in the coming weeks. 

This aligns with previous breakout patterns observed in Solana’s price action, where strong rebounds followed periods of consolidation.

Additional on-chain data supports the bullish case. Open interest in SOL derivatives has surged by 11%, signaling increased leverage and market participation. 

Traders are heavily positioned between the $125.8 and $128.5 range, with $40 million worth of long positions and $23 million in short positions currently open. If the price moves higher, liquidations of short positions could further fuel the rally.

Conclusion

Solana’s recent struggles highlight the network’s dependence on memecoin trading for revenue generation. The 93% decline in earnings and the drop in TVL reflect broader challenges in sustaining network activity when speculative trading slows.

At the same time, whale sell-offs have added to market uncertainty, although recent exchange outflows suggest that accumulation is taking place. While large investors are exiting positions, others are taking advantage of lower prices to increase their holdings.

Despite these challenges, Solana’s technical indicators paint a more optimistic picture. Bullish divergences on the charts, rising open interest, and increased trading volume suggest that SOL may be setting up for a price rebound. If the asset holds above $120, a move back toward $180 could be possible.

While risks remain, including further declines in on-chain activity and potential market-wide corrections, Solana’s ability to sustain its ecosystem and attract new use cases will determine whether this recovery is short-lived or the beginning of a longer-term uptrend.

Frequently Asked Questions

Why has Solana’s revenue dropped so sharply

Solana’s revenue declined by 93% due to a reduction in memecoin trading, which previously accounted for a significant portion of transaction fees on the network. The fading excitement around speculative tokens led to lower trading volumes, reducing earnings.

Can Solana’s price recover despite the revenue decline

While on-chain revenue has dropped, technical indicators suggest that Solana may be poised for a rebound. A bullish divergence on the charts, rising trading volume, and exchange outflows indicate that buying pressure is increasing. If SOL holds above $120, a move to $180 could be possible.

What impact do whale sell-offs have on Solana’s price

Whale sell-offs can create additional downward pressure on SOL’s price, particularly if large investors exit their positions at a loss. However, recent exchange outflows suggest that some investors are accumulating SOL, which could help stabilize the price and support a potential rebound.
Investor Caution 

While the crypto hype has been exciting, remember that the crypto space can be volatile. Always conduct your research, assess your risk tolerance, and consider the long-term potential of any investment.

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