The native token of Solana, SOL, experienced a decline of 9% from March 28 to April 4. However, during this time, several important metrics showed growth. While the price of SOL has dipped, the Solana network continues to outperform competitors, retaining its second position in terms of deposits and trading volumes. Traders are now curious about when SOL’s price will start to mirror this on-chain strength.
Solana surpasses competitors in TVL deposits and DEX activity
The waning interest from investors in SOL may be connected to the staked release of 1.79 million SOL, valued at over $200 million, on April 4. The selling pressure is evident, as these tokens were initially staked in April 2021, when SOL was priced around $23. Additionally, the general decline in the popularity of memecoins, which had previously driven new user adoption on Solana, could be impacting the price. With less speculative investment coming in, an increase in network activity may not immediately lead to price appreciation.
A range of meme-themed cryptocurrencies, like WIF, PENGU, POPCAT, AI16Z, BOME, and ACT, witnessed drops of 20% or more in the week leading up to this report. Nonetheless, despite challenging market conditions, the Solana network has outperformed some of its rivals. Its Total Value Locked (TVL) reached its highest point since June 2022, while activity on decentralized exchanges showed significant resilience.
Solana Total Value Locked (TVL).
On April 2, deposits in Solana’s decentralized applications (DApps) rose to 53.8 million SOL, reflecting a 14% increase compared to the previous month. In dollar terms, this amounts to $6.5 billion, placing Solana $780 million ahead of its nearest competitor, BNB Chain. The leading DApps by TVL on Solana include Jito (liquid staking), Jupiter (a major DEX), and Kamino (a lending and liquidity platform).
Solana prepares for scalability and Web3 developments despite MEV issues
Although it is not yet a direct competitor to Ethereum’s substantial $50 billion TVL, Solana’s on-chain data showcases greater resilience compared to BNB Chain, Tron, and Ethereum layer-2 solutions such as Base and Arbitrum. Currently, Solana commands a 24% market share in decentralized exchange (DEX) activity, with BNB Chain at 12% and Base at 10%, according to data sources.
DEX volumes monthly market share.
Despite Ethereum regaining the lead in DEX volumes, Solana has demonstrated impressive resilience following the collapse of the memecoin market. For context, Raydium’s weekly volumes plummeted by 95% from the all-time high of $42.9 billion achieved in mid-January. However, traders appear to value Solana’s emphasis on scalable infrastructure and an integrated Web3 experience, even amidst ongoing critique concerning maximum extractable value (MEV).
Source: X/Cbb0fe
In essence, MEV happens when validators rearrange transactions to enhance their profit. This issue is not unique to Solana; however, there has been criticism from some market actors, like a user known as Cbb0fe, a self-identified DeFi liquidity provider, regarding potential insider advantages. While not explicitly stated, the concerns likely pertain to incentives offered by Solana Labs to help mitigate the substantial costs associated with specific validators.
Advocates for revising Solana’s token distribution argue that the rewards derived from MEV provide adequate motivation for validators to secure the network, negating the necessity for additional inflation on SOL. Meanwhile, Loring Harkness, a core contributor to Shutter Network, suggests encrypting transactions before they enter the mempool to prevent validators from adjusting their order maliciously.
The increase in TVL and the resilience shown in the DEX market may not be sufficient for SOL to revisit the $200 mark observed in mid-February. However, Solana has firmly established itself as the second-largest platform for decentralized applications following Ethereum, backed by consistent user activity, ongoing infrastructure enhancements, and an expanding interest from developers and users alike.
This article serves as a general informational resource and should not be interpreted as legal or investment advice. The perspectives expressed here belong solely to the author and may not reflect the views of any specific entity.