Author: Luo Tuo Finance
If we are to talk about the most eye-catching public chain in this bull market, the so-called "server room chain" Solana is undoubtedly the one. The heavy blow brought by FTX has become the soil for Solana's rebirth, and with its outstanding performance and precise positioning, SOL has created a rare growth miracle on the wings of MEME, rising from $8 to a high of over $290, leaving the market in awe. The active participants, active capital, and active projects have formed an active ecosystem, and the slogan of surpassing Ethereum has frequently appeared when discussing Solana.
However, recently, the "king of retail investors" has not performed too satisfactorily. Looking at the past month, the price of SOL has fallen from a high of $295.83 to the current price of $169, a maximum decline of over 45%, nearly halving. The depressed prices, the gradual cooling of MEME, the unlocking of tokens, and the surging crowds at the SOL venue at the conference form a stark contrast.
One can't help but wonder, is Solana going or not going?
Judging solely from the price, the sluggish performance of SoL is mainly due to two direct causes, one is MEME and the other is token unlocking. Previously, SOL had risen to prominence thanks to MEME, successfully becoming a casino on the chain, but success and failure go hand in hand, and the recent MEME circle has left the market somewhat disappointed.
The root cause is the explosive celebrity coins, the Trump coin, the Trump First Lady coin, and the Argentina President-related LIBRA, which have been coming one after another, and the celebrities' use of their influence to harvest has made the already liquidity-scarce market feel powerless. In terms of price performance, the Trump coin has fallen 76% from its high point, with 800,000 people guarding the peak, MELANIA has fallen 90%, and the less influential LIBRA has plummeted 92% to near zero, with nearly 30% of the whales buying at the top and over 70,000 addresses being harvested.
The low threshold for token issuance has allowed the presidents to choose their own MEME between Bitcoin and Ethereum, which has undoubtedly shattered the market's confidence in liquidity injection. This sentiment cannot be expressed to the project parties, but is directly reflected in the infrastructure, especially considering the controversies surrounding Jupiter and Meteora in LIBRA, Solana has also encountered unexpected disasters.
Of course, Solana is not entirely innocent either. Since it has become a MEME casino, major institutions, bots, and market makers have made billions of dollars in profits through MEME on Solana. According to statistics from the founder of DeFiLlama, 0xngmi, the total profit is between $3.6-6.6 billion, of which $1.5-2 billion is MEV (Maximum Extractable Value), $1.09 billion is from trading bots and applications, $0-2 billion is from automated market makers, $0.5-1 billion is from Trump-related insiders, and the Pump.fun platform has also made a fortune of $492 million.
The MEME on Solana has become a cash cow for high-frequency traders, arbitrageurs and insiders, and as the market has become increasingly depressed, many have also chosen the more convenient way of confrontation - throwing in the towel. According to crypto analyst Ali, the number of active addresses on the Solana chain has dropped significantly from 18.5 million in November 2023 to the current 8.4 million, a 54.6% drop. According to Nansen's data, the number of active addresses on February 18 was only 5.17 million, a 22.37% drop in 30 days.
With fewer people, the coin price is naturally affected, not to mention that even Bitcoin is now in a state of half-dead Schrödinger. However, to drop 40% in a month and become the worst performing token among the top 30 coins by market cap, the impact of the MEME market alone is not enough.
Token unlocking has become another major obstacle facing SOL. Last month, the anonymous crypto commentator artchick.eth shared Solana's token unlocking schedule for 2025 on social media, mentioning that Solana's current token inflation rate is 4.715%, but in the next three months (February-April), over 15 million SOL tokens worth over $7 billion will enter the circulating supply. And on March 1, the largest unlocking will come, with 11.2 million SOL tokens worth about $2.06 billion being unlocked.
SOL unlocking schedule, source: artchick.eth
To trace the source of this unlocking, we have to go back to FTX. As part of the bankruptcy proceedings, FTX has liquidated 41 million SOL in three auctions, with the largest buyer being Galaxy Digital, which acquired 25.52 million SOL at $64 per token, accounting for 62.24% of the total, and the second largest buyer being Pantera, whose buyer consortium acquired 13.67 million SOL at $95 per token, with a return rate of 93%. Other buyers acquired 1.8 million SOL at $102 per token.
The SOL to be unlocked on March 1 is also part of the liquidated SOL. The only thing to be happy about is that FTX has started repaying on February 18, and Kraken has completed the first fund distribution of the FTX estate, paying over 46,000 creditors. The creditors are happy, but the SOL holders are quite nervous.
In the current not-so-good market, the large-scale unlocking of SOL is bound to be seen as selling pressure, thereby undermining investor confidence. Crypto trader RunnerXBT bluntly stated that now is a "dangerous" time to buy Solana. He also emphasized that once the SOL unlocking occurs, companies like Galaxy, Pantera and Figure will withdraw $3 billion, $1 billion and $150 million in unrealized gains respectively.
With the turbulent external environment and unstable internal environment, the market has quickly taken action, and in addition to selling and switching to stable assets, shorting has become the only option. Not only have the total open interest and funding rates shown divergence, but the long-short ratio has also differed greatly, and with the increase in open interest and funding rates turning negative, the current short-long ratio is 4:1, and most of the new positions were added after SOL fell to $190, indicating that the new buyers have a high bearish sentiment. Trading data has also contracted significantly, with Solana's on-chain activity plummeting from a peak of $35.5 billion in daily trading volume on January 17 to $3.1 billion on February 17.
Against this backdrop, SOL has also declined as expected, falling from $290 on January 19 to a low of $160, a 45% drop in January, which can be described as a falling flower and flowing water. Is the "king of retail investors" Solana about to fall?
Interestingly, at the recent Consensus conference, the Side Event hosted by Solana was still bustling with activity. Some people represent attention, and attention in the crypto circle means capital flow, which is in stark contrast to the activities of Minting and NFT, where the once-explosive concepts now have only a few participants.
In this regard, most industry insiders still seem to have a strong interest in Solana. Fundamentally, despite the criticism, the Solana ecosystem is still relatively strong, and looking at its ecosystem, it has encompassed the fields of payment, DeFi, LSD, Meme, games, NFT, and DePIN, and has many star projects. In terms of total TVL, SolanaTVL has reached $8.24 billion, which, although far behind Ethereum's $57.3 billion, has successfully leaped from being a nobody in 2023 to the second place among public chains, accounting for 7.72% of the total TVL. It is worth mentioning that in the past two weeks, affected by the unlocking, Solana TVL has dropped 19%, with Jito, Kamino, Marinade Finance and Sanctum rapidly flowing out.
A single-chain protocol can regain its peak from below $10, and apart from the so-called technical and positioning advantages, the power of capital is the real invisible hand. Heavyweight Western capitals such as A16z, Multicoin, Galaxy, and Pantera have formed the foundation of a strong consortium, which has also allowed Solana to thrive in many payment sectors. In the 2025 forecast by institutions prior to this, they have unanimously expressed high confidence in SOL.
Returning to the fundamentals, apart from the gradually declining MEME that is difficult to repair, the impact of token unlocking remains relatively controllable in the short term. The current unlocking has already been gradually carried out since early February, and the market has long expected it, while the upcoming unlocking only accounts for 2.31% of the total supply and market capitalization. Compared to the spot trading volume of around $3.6 billion in 24 hours, the selling pressure is not particularly strong. Of course, if the capital side chooses to sell a large amount in the market at one time, SOL will inevitably suffer a severe setback, but out of consideration for personal gains, the capital side will not choose this approach, and will instead adopt a controlled selling frequency, or even choose an OTC form for one-time sales, in order to minimize the impact on the market and maximize personal interests. Of course, it is not entirely optimistic, as in addition to the unlocking on March 1, there will be more selling pressure in the future.
From the perspective of positive news, there will be a wave of speculation on the SOL ETF. Currently, five institutions have submitted spot ETF applications for SOL, including Grayscale, Bitwise, VanEck, 21Shares, and Canary Capital. Although the SOL ETF failed to materialize last year, with the arrival of the new regulatory authorities, there is a glimmer of hope for the SOL ETF. The SEC has now accepted Grayscale's Solana ETF 19b-4 application, with the latest review date set for March 30, but according to the usual procedure, the SEC will typically continue to postpone the review, with a maximum time frame of 240 days. Given that the security nature of SOL has been clearly identified, the subsequent approval remains to be seen, and the chances of Litecoin and Dogecoin being approved may be relatively higher, but as long as the ETF is still under review, the narrative will not cease.
On the other hand, this does not mean that Solana is without problems. From the current structure, although DeFi and DePin are also hot, Solana is indeed highly dependent on the MEME ecosystem. According to data released by Messari for the fourth quarter of 2024, Solana's application revenue jumped from $268 million in the third quarter to $840 million at the end of the fourth quarter, a growth of 213%, and this growth was mainly attributed to MEME. Among them, Pump.fun generated revenue of $235 million in the fourth quarter, while the DeFi trading terminal Photon and the decentralized exchange Raydium recorded revenues of $140 million and $74 million respectively.
Objectively speaking, although MEME has become an enduring and important narrative in the crypto industry with long-term effects, at the end of the day, the MEME frenzy is still a result of the industry's persistently sluggish economic cycle. In other words, MEME is more like a lottery effect in the crypto market, a stage product under the background of insufficient liquidity, where people seek to get rich quickly. However, the market is tired of VC-style profiteering, and although MEME appears to be fairly launched, front-running, insider trading, and market manipulation by consortiums are ubiquitous, and this high-frequency, one-off harvesting has, to a certain extent, severely disrupted the industry's ecology. Take LIBRA as an example, the team behind it even tried to establish contact with the President of Nigeria, which means that perhaps presidential tokens can run all over the streets in the future, and scarcity is no longer a concern.
Against this backdrop, Solana's high dependence on MEME inevitably means that it will fluctuate with the ups and downs of MEME. The market's anger after the LIBRA explosion, the doubts about Jupiter and Meteora, and the impact on SOL have all confirmed this point. As the market's speculative sentiment is suppressed, the associated SOL is also bound to suffer, and combined with the key unlocking and selling expectations, SOL is likely to continue to decline.
Admittedly, at the current stage, Solana is still one of the most active public chains in the market, and the emotional release cannot last too long, and the capital-backed Solana is still "doing things" and building. But in a crypto market filled with FUD, the time left for SOL may not be as long as imagined.
