Solana’s total value locked (TVL) has taken a sharp nosedive, reaching its lowest point this month, signaling a decrease in activity on the Layer-1 network. With over $1 billion withdrawn from Solana’s DeFi ecosystem since the beginning of the month, the decline in TVL can be linked to a drop in daily active addresses on the network, indicating a shrinking user base and reduced on-chain activity. According to DeFiLlama, Solana’s TVL currently stands at $8.01 billion, representing a 12% decline since December 1, with $1.1 billion exiting the ecosystem. Jito, the network’s leading DeFi protocol, also suffered a significant blow, recording a 28% drop in TVL over the past month, now sitting at $2.66 billion.
Solana’s TVL decline is emblematic of the broader decrease in usage observed during the review period. User activity on Solana has been on a downward trend since the start of the month, with 5.37 million unique addresses completing at least one transaction on the L1 over the past 21 days, marking a 7% decrease in on-chain activity. The network’s revenue has also taken a hit due to the decrease in usage, exacerbated by SOL’s performance, which has seen a 28% drop in value over the past 30 days. According to Artemis’ data, network revenue has plunged by 24% since the beginning of December.
A closer look at the SOL/USD one-day chart reveals a negative Chaikin Money Flow (CMF), confirming the coin’s low demand. The CMF, currently at -0.04, indicates more market distribution (selling pressure) than accumulation (buying pressure), suggesting a sustained price decline. If selloffs persist, SOL’s price may drop to $168.83. Nevertheless, this bearish projection could be overturned if market sentiment shifts from negative to positive, sparking renewed buying activity. In such a scenario, SOL’s price is likely to break above resistance at $187 and strive to surpass the $200 mark.
In conclusion, Solana’s TVL has experienced a significant drop, reflecting a decline in activity on the network, with over $1 billion exiting the DeFi ecosystem since the beginning of the month. The decrease in daily active addresses suggests a dwindling user base and reduced on-chain activity. While Solana’s TVL decline mirrors the broader drop in usage, a shift in market sentiment could reverse the bearish trend, potentially leading to a resurgence in buying activity and an increase in SOL’s price. As the ecosystem continues to evolve, it will be interesting to see how Solana adapts to these challenges and works towards regaining momentum in the DeFi space.
