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/TradingViewWhile 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: DefiLlamaData 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.financeCrypto 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.”
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.comAfter 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.
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.
