The daily trading volume of decentralized exchanges (DEX) on Solana [SOL] has decreased, contrasting with the figure three days prior, which exceeded $1.5 billion. This decline is notable compared to Solana's performance in April when its DEX volume reached a monthly high of $60 billion.
As May nears its end, the total monthly volume may be lower, potentially linked to reduced interaction with memecoins on the network. The memecoin frenzy had previously driven the surge, so the current decline suggests that interest in memecoins launched on Solana has diminished. This decrease has negatively impacted SOL, the ecosystem's native token.
At the time of writing, SOL's price was $161.49, down from nearly $190 a few days ago. If the DEX volume continues to drop, SOL's price may also decline, as demand for the cryptocurrency is closely tied to memecoin trading. While some memecoins can be exchanged for USDC, most require SOL.
Thus, a decrease in memecoin purchases would likely reduce bids for SOL. In addition to this trend, other metrics could also predict the future direction of Solana's price.
The SOL has become weak
Solana's Open Interest (OI) was an additional metric that we examined. Santiment statistics indicated that the OI had decreased to $1.90 billion. This worth was close to $2.20 billion as of May 20.
In a contract, OI is the total value of all open positions. If it rises, it indicates that net positions are rising and that fresh capital is entering the market. The increase in this case is a bullish indication.
The chart below provides a nice illustration, with SOL's price rising to $188.45 as the OI increased. On the other hand, this decline meant that more liquidity was extracted from SOL contracts.
As a result, there is less chance of a rise. The price of SOL could keep dropping and might even reach $145.90 if this trend keeps up.
Furthermore, Solana is beginning to lose ground to other blockchains in terms of activity, with strong competition coming from initiatives like Aptos [APT] and Sui [SUI].
Nevertheless, it is still unclear if these initiatives would eventually exceed Solana in transactions on a sustained basis.
If they do, Solana's price may drop and it may lose some of its market value. On the other hand, Solana may resume its growth trajectory if it manages to restore its pace.
May 2024, Cryptoniteuae