Solana Price Prediction as Total Value Locked Declines by 20% – Is Demand for SOL Weakening?

Following an earlier retest of last week’s lows in the $85s, Solana price (SOL) is attempting to rebound, though declining total value locked (TVL) remains a concern for the bulls.

SOL/USD was last changing hands around $94, with the SOL price up around 5%.

Solana has been moving higher on Monday in tandem with a push higher in leading cryptocurrencies Bitcoin and Ethereum amid optimism that spot Bitcoin ETFs will gain approval in the US this week.

However, at $4.125 billion as per DeFi Llama data, Solana’s declining TVL is a warning sign.

Trade Value Locked (TVL) refers to the dollar-denominated value of cryptocurrency locked within the smart contracts deployed on any given blockchain.

Solana’s TVL peaked on the 25th of December at $5.15 billion and has since declined 20%.

Part of that can be explained by a pullback in the price of Solana and Solana blockchain-issued assets.

SOL is down around 25% from its December peaks, while leading Solana meme coin Bonk (BONK) is down over 70%.

But it may also suggest that DeFi investors and crypto traders have been shifting capital away from Solana.

Is Demand for Solana (SOL) Weakening?

Price declines in major Solana ecosystem assets comes at a time when other on-chain indicators are also flashing weakness.

As per The Block, the 7-day moving average number of active and new addresses engaging with the Solana network appears to have peaked and be in decline.

7DMA of active addresses on the Solana network / Source: The Block

The 7-day moving average of value moved on chain appears to have also peaked, though remains elevated.

Meanwhile, as per DeFi Llama, total trading volumes across major Solana-based Decentralized Exchanges (DEXs) hit their lowest in over a month over the weekend.

DEX volumes fell under $460 million on Saturday after surpassing $2.6 billion on the 21st of December.

Solana-based Decentralized Exchange (DEX) Voumes / Source: DeFi Llama

Weaker on-chain activity means a decline in fees collected by the Solana network from its users.

The network took fees of $306,000 on Saturday, as per DeFi Llama, the lowest since December 20th.

Solana network fees / Source: DeFi Llama

Given Solana users must pay fees in SOL.

Lower fees collected by the network thus suggest waning demand for Solana amongst its users.

Price Prediction – Where Next for Solana (SOL)?

Softening on-chain metrics could act as a headwind for SOL, meaning short-term price predictions may remain bearish.

With the SOL price still up 450% from its September lows in the $17s, the cryptocurrency still remains at a high risk of profit-taking.

What’s to stop traders who are up a few 100% from viewing waning activity on the blockchain and thinking that now is a good time to book gains.

Analysis of recent SOL price chart formations is also concerning for the bulls.

SOL/USD appears to have formed a bearish descending triangle in 2024.

This pattern suggests pressure may be building for a more sustained break below $86 support in the near future.

Solana (SOL) Price Chart / Source: TradingView

Of course, the market’s reaction to the anticipated approval of spot Bitcoin ETFs this week could be decisive for Solana.

Approval could trigger a sudden surge in risk appetite which could see SOL quickly fly back towards December’s highs.

If that is also coupled with a reacceleration of Solana network activity, this could turn into a sustained rally towards the $140s.

But if the market sees a “sell-the-fact” reaction to Bitcoin ETF approvals, Solana’s recent bearish trend will probably continue.

Meme Coin Alternative to Consider – Meme Kombat

Whilst SOL has potential to perform well, downside risks are high, and its 450% rally in recent month’s suggests a lot of the easy gains have already been missed.

Investors looking to bag gains in the region of 100x have probably missed their opportunity.

Investors looking to bag 100x gains might instead want to check out a high-risk/high-reward crypto investment strategy that has been growing in popularity in recent years – investing in token presales.

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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.

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