Solana falters. Long presented as one of Ethereum's most serious competitors, the blockchain is today facing a marked decline in its fundamentals: decline in liquidity, user disengagement, slowdown in innovation. After months of euphoria, the ecosystem is showing clear signs of slowing down.
In brief
- Solana is going through a period of marked slowdown, despite its status as a rival to Ethereum.
- Its TVL (Total Value Locked) fell by more than $10 billion in less than three months.
- Revenue generated by DApps on Solana is in sharp decline, signaling user disengagement.
- Memecoins, once drivers of activity on the blockchain, are attracting less and less interest.
The slowdown of onchain activity on Solana
The Solana blockchain, once recognized for its ability to drain capital and talent at high speed, today sees its Total Value Locked (TVL), the main indicator of vitality of its ecosystem, plunge suddenly, while JPMorgan has just launched a $50M issue there.
Indeed, Solana's TVL fell from $15 billion in September to less than $5 billion, a loss of more than $10 billion in less than three months. At the same time, weekly revenue generated by DApps on the platform fell from $37 million to $26 million, illustrating a marked decrease in economic activity on the blockchain.
This trend is directly linked to a reduction in the deposit of smart contracts, which mechanically increases the quantity of SOL available for sale.
This disengagement is also reflected in the attitude of traders towards the native token SOL. On-chain data shows that the annualized funding rate for SOL perpetual futures was just 6% as of Friday, signaling sluggish demand for long positions.
An anomaly was also observed on Thursday, with a negative funding rate of −11%, interpreted not as a massive bearish signal, but as a temporary imbalance corrected by liquidity providers. In summary, several key indicators testify of a growing disinterest in financial products linked to Solana:
- A 46% drop in the price of SOL over three months, with no recovery above $145;
- The drop in the funding rate: only 6% annually, compared to 10–12% during the bullish phase;
- The temporary negative rate of −11%, revealing uncontrolled volatility;
- A reduction in market depth on DEXs, a consequence of a drop in post-liquidation confidence.
Technical innovations struggling to revive market confidence
Despite this deterioration in market indicators, Solana's technical development is not running out of steam. The blockchain officially launched this Friday on the mainnet Firedancer, a new validation client developed for more than three years under the direction of Jump Trading.
Presented as a major advance in performance and scalability, this client managed to resynchronize a node in less than two minutes. This performance aims to improve the resilience of the network and its capacity to absorb increasing volumes, a central argument in Solana's long-term strategy.
At the same time, certain projects continue to innovate on the application layer. This is the case of Kamino, the second largest DeFi protocol in the Solana ecosystem in terms of TVL, which announced the launch of new products on Friday: fixed-rate loans, off-chain collateral, on-chain credit lines backed by bitcoin and private credit solutions.
Kamino records $69 million in annualized revenue and averages a 10% annual return on deposits, notable figures amid a cooling market. Yet software improvements or expansion of DeFi offerings alone are unlikely to be enough to restore the confidence needed for a sustainable uptrend.
While the ecosystem is losing steam on a fundamental level, another indicator is attracting attention: Solana ETFs are exploding. This renewed institutional interest contrasts with the on-chain decline and could ultimately redefine the trajectory of the network if this enthusiasm continues beyond the announcement effect.
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