Solana (SOL) price has declined by 50% since hitting an all-time high of $295 on Jan. 19. February’s 42% drawdown is also the largest monthly drawdown since November 2022, when FTX exchange collapsed.
Solana’s 4-hout chart. Source: Cointelegraph/TradingView
While the uncertainty tied to Solana’s 11.2 million token unlock and the LIBRA memecoin scandal are likely playing a role in the current decline, there are fundamental reasons that provide a better explanation for the recent correction.
Solana’s TVL dropped by $5 billion since Jan. 25
Solana surpassed its record high $10 billion high total value locked (TVL) in January and has been in a decline since reaching that top. After reaching a $12 billion TVL, it has since dropped to $7.13 billion.
Solana TVL and onchain volumes. Source: DefiLlama
Data from DefiLlama highlighted that the subsequent decrease in TVL was led by Raydium, with a whopping 60% drop in less than a month. Other major decentralized applications such as Jupiter DEX, Jito liquid staking, and Kamino Lending registered a 25%, 46% and 33% decline respectively.
These directly impacted Solana’s onchain volumes, which dropped from a weekly collection of $97 billion in the second week of January to only $7 billion this week.
These metrics indicate a glaring shift in trust for Solana’s ecosystem, leading to massive decline in activity over the past month.
$500 million shifts to Ethereum, Arbitrum and other blockchains
SOL price and the network’s collapse in activity has caused a seismic shift in interest from traders, and most are moving their liquidity to other chains. Over the last 30-days, traders have bridged close to $500 million to other chains, with Ethereum, Sonic and Arbitrum being notable destinations.
Solana outflows data to other chains. Source: debridge.finance
Crypto analyst Miles Deutscher highlighted that Solana’s fee burn dropped to its lowest value of $177,000 in a month, and said,
“People are tired of getting burned at the casino, and many are walking away from the tables.”
Related: Crypto sentiment sinks to ‘extreme fear’ as Trump says tariffs still on
Collapse of the memecoin meta
At the height of its influence, Solana’s collective memecoin market cap stood at $25 billion in December 2024. The current value has declined to $8.3 billion, with a 23% crash over the past 24 hours.
Solana memecoins on CoinGecko. Source: X.com
After 7.5 million tokens were launched and $550 million revenue was generated on Pump.fun, most of these memecoins from this market are down 80% to 90%. While SOL is not a memecoin, the rise and fall of these tokens affected its perceived valuation.
Related: BTC price levels to watch as Bitcoin skids to 3-month lows under $87K
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
