Over the past week, there has been a notable 21% decrease in Solana's native token, SOL, which has reached its lowest value in almost six weeks. Given that SOL's price increase of 61% in March, investors may have been unduly enthusiastic. This decline has resulted in significant liquidations of leveraged long SOL futures contracts totaling $113 million since April 11.
This begs the issue of whether the $130 support level will keep steady and if there will be any more corrections.
The expansion of the Solana ecosystem and Coinbase integration
Market observers note that Solana's $60 billion market capitalization right now looks excessive, especially in comparison to Avalanche's $10 billion, which is four times more than Solana's. Some counter that the quick growth of Solana's ecosystem—many projects are establishing its own tokens—justifies the premium.
Coinbase stated on April 16 that over 50,000 Solana SPL tokens are supported by its wallet, which is now fully integrated with the Solana decentralized exchange (DEX) ecosystem. By enabling users to enter the contract address directly into the "swap flow," this integration streamlines the trading process and lowers the barrier to entry into Solana's ecosystem.
The open interest in SOL futures dropped by 40% to $1.5 billion between April 12 and April 17, indicating a decline in the desire for leverage. It is possible to determine if this reduction was predominantly caused by a decline in interest in long positions by analyzing the financing rate of SOL futures.
One common indicator of market mood for SOL perpetual futures is the financing rate. Whereas a negative rate denotes a preference for shorts who are betting on a drop in price, a positive rate implies a greater demand for leveraged long positions.
Since April 12, the financing rate for SOL futures has been quite low, indicating that long and short bets are equally valued. Given that SOL's price has decreased 33% over the past 16 days and is about to fall below $136 for the first time since March 6, this data is fairly comforting.
Network congestion recently did not stop Solana DApps from operating.
Transaction failure rates on the Solana network reached up to 75% recently due to heavy congestion. Developers released an update in response with the goal of removing these obstacles. Many projects have had to delay their token releases until these network issues are completely fixed as a result of this issue.
SOL's success was further burdened by failures in a number of noteworthy projects, including MarginFi. Following his resignation as CEO of MarginFi on April 10, $190 million in withdrawals were made. As more Solana-based applications accused MarginFi of not giving users their credits, the dispute grew more intense. The instability and difficulties in the Solana environment are highlighted by this circumstance.
All in all, there was a noticeable decline in Solana SPL tokens regardless of underlying causes. Jito (JTO) has dropped 29% since April 12 in the decentralized finance (DeFi) space, while Raydium (RAY) and Jupiter (JUP) have dropped 24% and 27%, respectively. Moreover, during the course of six days, the value of well-known Solana memecoins, such as Dogwifhat (WIF), dropped precipitously by 32%.
April 2024, Cryptoniteuae