Key Findings

• Solana DApp (Decentralized Application) activity has stalled as interest in memecoins fades.
• Tokenized Traditional Finance (TradFi) and Real-World Assets (RWA) are positioned to potentially reignite SOL’s long-term growth potential.

Market Performance Slump

Solana’s native cryptocurrency (SOL) faced a strong rejection at the $158 level on Monday, subsequently dropping to $143 by Wednesday, marking a 14% loss over the seven-day period. Traders are now concerned that the possibility of reclaiming the $200 resistance level may have diminished, particularly amid a surge in demand for leveraged SOL positions due to recent price weakness.

As of Wednesday, SOL futures open interest reached 45.7 million SOL, an 18.5% increase from the previous month. While neutral market dynamics imply a price near $143, $158 represents support. However, the aggregate value of these leveraged positions reached $6.7 billion. Assessing whether aggressive shorts or longs dominate the market is essential.

Funding Rates Signal Diminishing Bullishness

Funding rates on perpetual futures serve as a key indicator of market sentiment. Neutral conditions typically see these rates range between 5% and 15% annuallyized. Departures from this range signify imbalances. On Wednesday, SOL’s funding rate fell to 0%, indicating a growing appetite for bearish positions.

More critically, SOL’s funding rate has failed to stay above the 15% annualized threshold consistently over the past three months, suggesting a systemic lack of bullish confidence. The rally to $185 mid-May failed to reignite trader interest in leveraged longs.

The failure of leveraged positions to capitalize on price rallies signifies deteriorating confidence, challenging SOL’s path back to $200 in the near term, absent intervention.

Weakening Network Activity Underpins Price Decline

SOL’s market performance remains closely correlated with Solana Network activity. However, indicators like total value locked (TVL) and DApp weekly revenue show stagnation.

TVL on Solana has remained static at nearly $10 billion, while weekly DApp revenue has plummeted below $40 million. This contrasts sharply with the peak rates seen between mid-November and mid-February.

This activity stall directly coïncides with the cryptocurrency’s recent valuation decline.

Memecoins Factor in the Correction

SOL’s recent decline also reflects the waning of overhyped memecoin_activity, particularly following the launch of the Official Trump (TRUMP) token on Solana. While surprising due to previous Trump-aligned entities preferring Ethereum, this instance demonstrated how meme assets can drive surge and subsequent sell-off waves.

SEC Approval of SOL ETF Sees as Major Catalyst

The potential approval of a Solana spot exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission (SEC) is viewed, irrespective of recent price action, as the most significant catalyst for SOL among short-to-medium term traders.

Longer-Term Potential: Tokenized TradFi/RWA

Looking beyond the immediate price action, analysts from Cantor Fitzgerald highlight institutional adoption as a key growth driver for SOL. A Cantor Fitzgerald equities research report suggests SOL could gain substantial benefits “even more” than Ethereum from tokenized securities representing TradFi and RWA.

These analysts assert Solana is “meaningfully better than Ethereum across every metric.” They project a rise in industries adopting SOL as a treasury asset due to its stronger developer growth and operational efficiency compared to Ethereum’s layer-2 problem.

Catalyst Assessment & Future Outlook

While the $200 price target appears increasingly distant based on current sentiment parameters including derivatives and activity indices, analysts believe underlying catalysts could rapidly change market dynamics.

Growing institutional interest and broader blockchain adoption may soon reverse the current sentiment.