The price of SOL is moving slower than the altcoin market: Has the golden age of Solana passed?

The native token of Solana, SOL, has experienced a 32% decline since November, significantly underperforming the overall altcoin market, which has only decreased by 21%. This gap is becoming a concern for bullish investors, especially as capital continues to flow into SOL ETFs and more companies add this asset to their balance sheets as a reserve solution.

Currently, traders are asking: What needs to change for the price of SOL to recover and establish a sustainable upward trend?

SOL/USD exchange rate (green) compared to the total cryptocurrency market capitalization (red) | Source: TradingView Since the launch of the REX-Osprey SOL+Staking ETF in July, the Solana ETF in the US has attracted $636 million in assets. At the same time, companies such as Forward Industries (FORD US), Solana Company (HSDT US), and Sharps Technology (STSS US) have collectively added a total of 20.35 million SOL to their balance sheets, valued at over $2.5 billion.

Direct staking on the Solana network also helps limit the amount of SOL that can be sold immediately. Currently, nearly 68% of the circulating supply is delegated to the proof-of-stake system, a ratio that has been steadily increasing in recent months. The staking yield on Solana can exceed 6%, as SOL maintains inflationary measures to offset the costs of operating validator nodes.

Native has staked SOL on the Solana network | Source: StakingRewards The total amount of staked SOL has increased from 410 million to 418 million over the past two months, continuing the trend that began in March. Therefore, the decline of SOL to $120 seems to reflect waning expectations for network usage demand. Additionally, the broader market’s adoption of cryptocurrencies may have shifted toward competing platforms or alternative solutions that do not require direct blockchain transactions.

Compare weekly transaction fees on the Solana network with DApp revenue, USD | Source: DefiLlama On-chain activity on Solana has steadily decreased since August, with total weekly network fees dropping from $7 million to $4.5 million. Decentralized applications (DApp) on Solana also saw a 30% decline in revenue during the same period, down to $26 million per week. Meanwhile, activity on other networks has experienced strong growth.

On-chain activity on Solana is being surpassed by Ethereum’s Layer-2 ecosystem

Monthly transaction volume on Solana increased only slightly by 4%, while Ethereum grew by 6%. Conversely, platforms like Base saw a 34% increase, Arbitrum 21%, and Polygon up to 89%. Tron, Solana’s direct competitor, also recorded a 13% increase in transaction volume over 30 days. Ethereum’s Layer-2 ecosystem continues to expand, offering low fees and a total value locked (TVL) surpassing Solana, reaching $8.5 billion.

Top blockchains ranked by 30-day transaction fees | Source: Nansen SOL investors are also becoming more cautious following the success of DApps on BNB Chain, such as the decentralized exchange Aster and the memecoin launch platform Four-meme. Support from the world’s largest cryptocurrency exchange helps these projects reach a broader developer community, marketing channels, and a large user base. Binance’s recent moves in the market prediction sector could further weaken SOL’s bullish outlook.

SOL will find it difficult to narrow the performance gap with the overall altcoin market unless there is a clear reversal in Solana’s on-chain activity. Whether due to competition from other blockchain networks or traditional fintech entities like Nasdaq’s 23-hour trading plan, the prospects for maintaining a strong upward trend for SOL remain limited.