Why Is the Price of Solana (SOL) Dropping Today? Analysis of the Causes of the Decline

Why Is the Price of Solana (SOL) Dropping Today? Analysis of the Causes of the Decline

The price of the Solana (SOL) cryptocurrency is down 3% today and is trading at $173, with this decline taking place in the context of minor corrections across the entire crypto market. The reason for today's bearish trend is the significant downturn in onchain activity, which is negatively impacting the usage of this popular blockchain network.

Declining Solana Network Activity

According to data from DefiLlama, there has been a dramatic decrease in the total locked-in value (TVL) on the Solana network, which dropped from $7.2 billion to $6.2 billion, a 13.8% decrease between October 27 and October 31. This trend suggests that fewer users and developers are joining the network, which is reducing momentum and contributing to the decline in SOL. At the same time, there has been a decline in real economic value, which has fallen from an all-time high of $11.1 million as of October 24 to the current $7 million.

Weak Memecoins in the Solana Ecosystem

Today's drop in the SOL price is also associated with a significant correction in the memecoins that are part of the network. Most of them are showing significant daily losses. For example, Dogwifhat (WIF), which is the leader in its class, lost more than 1.4% in 24 hours. Other memecoins such as Bonk (BONK), Cat in the Dog World (MEW) and Book of Meme (BOME) also saw declines ranging from 3.6% to 5.3%. The biggest losses were then suffered by holders of the Gigachad (GIGA) and Goatsues Maximus (GOAT) tokens, which fell 8.7% and 7% respectively in a single day.

Decline in Market Capitalization and Trading Volume

Data from CoinMarketCap shows that the total market capitalization of Solana-based tokens decreased from $277.9 billion to $275.2 billion. At the same time, there was a 25.7% drop in trading volumes. These factors point to a negative investor reaction to declining value and market activity, which only reinforces the decline in the SOL price.

Bearish Divergence and Technical Analysis

Another factor that contributed to the decline is the bearish divergence between the SOL price and the Relative Strength Index (RSI). Between October 24 and 29, the SOL price rose while the daily RSI declined - a signal indicating a weakening of the uptrend. The previous rise led to overbought conditions, which triggered a correction and profit taking when the RSI reached 72.

Conclusion

The situation surrounding Solana today is a testament to the complexity of the cryptocurrency market, where external factors such as user activity and economic trends can significantly affect the value of a token. As we watch further developments, it will be interesting to see if the network can recover and attract back users or if there will be another decline. One thing is for sure - the cryptocurrency world is never boring.

*This is not investment advice.

Coingarage team