Solana climbs back above $72 as onchain metrics reveal declining strength
While tokenized stock trading provided a boost to Solana's network, diminishing Total Value Locked and decentralized exchange activity suggest momentum is weakening.
Key takeaways:
- The recovery of SOL to $72 reflects positive futures sentiment and anticipation of airdrops, though decreasing TVL and reduced DEX activity suggest vulnerable onchain interest.
- Trading of tokenized stocks generates enthusiasm on Solana, but reliance on Pump.fun and rivalry from Hyperliquid may undermine long-term SOL growth.
The native cryptocurrency of Solana, SOL, surged to reach $72 during Friday's trading session, creating distance from the previous day's low of $64. Trader confidence was partially driven by impressive expansion in tokenized stock trading activity, powered by interest in the AI industry. Nevertheless, growing rivalry among decentralized application platforms may constrain SOL's near-term growth potential.
Data from Jupiter Aggregator indicates that tokenized stocks on the Solana network processed more than $113 million in trading volume during a 24-hour period. Nevertheless, concerns emerged regarding the comparatively shallow liquidity present in automated market-making pools, particularly with several issuers competing to offer similar financial products. However, considering that some of these tokens were introduced only recently, the limited number of holders in most instances may be attributed to their newness.
Over the previous month, the Total Value Locked (TVL) within the Solana ecosystem experienced an 11% decrease, as Base, an Ethereum layer-2 solution, narrowed the distance. Notable negative developments for Solana's TVL encompass a 19% reduction in Kamino, a 20% decrease from Binance Staked SOL, and a 17% drop in Raydium. Conversely, the tokenization platform xStocks demonstrated 31% expansion in TVL.
Weekly trading activity on Solana's decentralized exchanges (DEX) declined to $10 billion from the $30 billion recorded in early February, aligning with a downward trend in revenue generated by decentralized applications (DApps). Consequently, despite the successful introduction of tokenized technology stocks and equity index products, blockchain processing demand for SOL continues to remain muted.
Heavy reliance on Pump.fun and rising rivalry in tokenized asset launches threaten Solana
Even more troubling is the fact that 30% of Solana's DApp revenue originated from Pump.fun, a token launch platform that relies substantially on memecoin-related activity. Analysis from CoinGecko showed that 80% of the 18.7 million tokens introduced failed within 48 hours, while Dune data indicates that 55% of participating addresses experienced losses of up to $1,000.
Interest in bullish leveraged positions for SOL futures rose on Friday, elevating the funding rate to the highest point observed in June. The present 10% level does not indicate excessive optimism, as the 6% to 12% range is generally considered neutral territory. Nonetheless, the 14% increase from Thursday's $64 bottom successfully reversed the pessimistic sentiment indicated by negative funding rates.
A portion of the optimism among SOL investors can be attributed to expectations surrounding upcoming airdrops on the network, though the precise timing of these token launches has not been confirmed. Notable projects include OnRe reinsurance platform with $200 million in TVL, Bulk perpetual DEX featuring an aggregate open interest of $325 million, and Loopscale lending platform holding $79 million in TVL.
Declaring that SOL will definitely reclaim the $80 level, which was last observed on June 1, may be hasty considering the heightened competition in tokenized stock trading from Hyperliquid and centralized exchanges operating on rival blockchains. For example, OKX established a strategic partnership with the parent company of the NYSE utilizing Ethereum-based infrastructure systems.