Solana Drops 50% from Peak after Meme Coin Trading Decreases

Solana has experienced a pullback of over 50% from its all-time high of $295 in January, which may be attributed to the waning popularity of meme coin trading.

Solana (SOL) has recorded its most dismal monthly performance since the FTX debacle in November 2022, with a 38% drop in the past 30 days. This decline has been primarily driven by the decrease in memecoin trading activity, which had previously fueled Solana's substantial on-chain volume.

As of Feb. 26, Pump.fun, Solana's memecoin trading platform, has minted a staggering 8.1 million tokens and raked in $577 million in fees. On Feb. 12, Pump.fun achieved a daily trading volume of $218 million, marking a monthly high. However, it seems that the momentum has tapered off.

Data from a Dune analytics dashboard indicates that trading volume has plummeted by 94% in a single day, from $89.5 million on Feb. 25 to a mere $5.03 million on Feb. 26. The majority of tokens have plunged 80-90% from their peaks, mirroring the downturn in the broader memecoin market.

Solana's decentralized finance ecosystem has been hit hard by this crisis, with significant outflows. According to DefiLlama, Solana's TVL has plunged from $12 billion in early mid-January to $7.13 billion, resulting in a loss of $5 billion in less than a month.

In the last 30 days, Raydium, the decentralized exchange that hosts Pump.fun-graduated memecoins, has witnessed a 50% TVL drop. Capital is also shifting to other networks as Solana's activity dwindles. Over the past 30 days, more than $500 million has been transferred to Ethereum (ETH), Arbitrum (ARB), and Sonic (SONIC).

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Currently, SOL is trading at $142, a 15% drop in the last 7 days. Bulls are finding it challenging to establish a support level, with $140 serving as a crucial threshold. If SOL fails to maintain its position above this level, the next significant support lies between $125 and $130. A breakdown below this range could drive SOL to its lowest price since Aug. 2024.

For SOL to regain its bullish momentum, it needs to reclaim the $150 mark and witness a revival in TVL and on-chain volumes. Until then, the potential for further declines remains high, adding to the uncertainty.

An upcoming unlock of 11.2 million tokens on March 1 could exert additional pressure on SOL. Moreover, the probability of a Solana ETF being approved soon is low, reducing the chances of an immediate institutional trigger.

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