Solana (SOL) has seen a sharp decline, falling 50% from its peak price of $295 on January 19. The 42% slump in February marks its worst monthly drop since the FTX collapse in November 2022.
While concerns surrounding Solana’s upcoming 11.2 million token unlock and the LIBRA memecoin controversy may have contributed to the downturn, deeper fundamental issues explain the current correction.
1. Solana’s Total Value Locked (TVL) Plummeted by $5 Billion
Solana reached a record-breaking $12 billion in TVL in January but has since dropped to $7.13 billion, signaling a loss of investor confidence.
According to DeFiLlama, major projects on the network have suffered significant declines:
- Raydium: Down 60% in under a month
- Jupiter DEX: Dropped by 25%
- Jito Liquid Staking: Fell 46%
- Kamino Lending: Declined 33%
On-chain transaction volumes also took a major hit, shrinking from $97 billion weekly in mid-January to just $7 billion now. The drop in TVL and transaction volume suggests waning trust in Solana’s ecosystem.
2. Traders Are Moving $500 Million to Ethereum, Arbitrum, and Other Chains
With Solana struggling, many traders are shifting liquidity to alternative blockchains. Over the last month, approximately $500 million has been bridged to Ethereum, Arbitrum, and Sonic, among others.
Crypto analyst Miles Deutscher pointed out that Solana’s fee burn hit a low of $177,000 for the month, commenting:
“People are tired of getting burned at the casino, and many are walking away from the tables.”
This migration of liquidity weakens Solana’s network activity, further pressuring its price.
3. The Memecoin Hype Has Fizzled Out
During its peak in December 2024, the total market cap of Solana-based memecoins was around $25 billion. Fast forward to today, that figure has plummeted to $8.3 billion, with a steep 23% drop in just 24 hours.
The memecoin craze, fueled by platforms like Pump.fun, saw over 7.5 million tokens launched and $550 million in revenue generated. However, most of these tokens have now crashed by 80-90%, leaving traders disillusioned.
Although Solana itself isn’t a memecoin, its price was heavily influenced by the speculative boom. As interest in memecoins fades, SOL’s valuation is feeling the impact.
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