3 key Solana metrics explain exactly why SOL price is down

The last eighty days have seen a moderate bearish trend in cryptocurrency as altcoin market capitalization fell by 16%. This can partly be explained by the quantitative tightening of the United States Federal Reserve, rising interest rates, and the halting asset purchases. They are intended to curb inflationary pressure but also increase borrowing costs for businesses and consumers.

Solana’s SOL token (SOL) has fallen even harder, and the altcoin has seen a 29% correction in August. The smart contract network is focused on speed and low fees, but frequent outages are a sign of a centralization problem.

Solana/USD price (blue) vs. altcoin capitalization (orange). Source: TradingView

A misconfigured validator had halted transactions on blockchain, causing the latest setback to occur on September 30. Due to incompatibility between the validator and the duplicate node instance, the network was forced to fork. The remaining nodes couldn’t agree on the correct version of the chain.

Anatoly Yakovenko, co-founder of Solana, placed his bets recently on Firedancer. This scaling solution was developed by Jump Crypto in partnership to the Solana Foundation. The mechanism is being referred to as the long-term solution to the network outage problem. It should be available for testing in the upcoming months.

Mango Markets, a Solana-based central finance exchange Mango Markets, was hit by an exploit worth $115 million on Oct. 11. The attacker was able to manipulate the value of MNGO native token collateral and took out “massive loan” from Mango’s Treasury.

Solana’s TVL was reduced and there were fewer active addresses

In November, Solana’s primary decentralized app metric began to show weakness. At 30.4 million SOL, the network’s total value locked(TVL), which measures how much money has been deposited in smart contracts, fell to its lowest point since September 2021.

Solana network total value locked, SOL. Source: DefiLlama

Other factors can also influence Solana’s TVL and decrease in value. Investors should examine the active addresses within the ecosystem to confirm that DApp usage has decreased.

Solana DApps 30-day On-Chain Data. Source: DappRadar

DappRadar data for Oct. 19, shows that 13 of the top 20 DApps have seen a decline in the number of Solana networks addresses interacting with decentralized apps. SOL’s futures markets also showed a decrease in interest.

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Fixed-month contracts trade at a slightly higher premium than spot markets, because investors are more willing to hold the settlement. This indicator can turn negative or fades, which is a warning sign of backwardation.

Solana 3 month futures on an annualized basis. Source: Laevitas

This chart shows that Solana futures are trading at a discount of 7% compared to the spot price. This is alarming as it indicates a lack in interest from leverage buyers.

SOL will continue to perform poorly until these metrics are changed.

Although it’s hard to pinpoint the exact cause of Solana’s drop in price, it’s clear that centralization issues and a decrease DApp usage by the network as well as fading interest from derivatives traders played a part.

If sentiment turns, there should be an increase in deposits. This will increase Solana’s TVL as well as the number of active addresses. The above data suggests that Solana investors shouldn’t expect a price rebound anytime soon, as network health metrics are still under pressure.

com. You should do your research before making any investment or trading decision.

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Donna Burk

Donna Burk– Business News My Name is Donna Burk and I am also the main source from the ‘Dailynewssheet.com’ of all the exclusive and most delicate visualization of the activities in the business sector. My first step towards this journey was taken in the very early years of my life. I started with an independent financial consultant. However, I only had almost 4 years of skills and experience in this market. I have always been a free personality and like to fly one place to another, to explore more and more. Moreover, this passion and craze of traveling gave me a chance to report a section for best news associations. Last but not least, I am presently working full-time as an editor.

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