SOL price is down today as a pronounced decline in onchain and economic activity leads to a drop in Solana network use.
Solana’s native token, SOL SOL$174.16, is down 3% on Oct. 31, amid minor corrections across the broader crypto market.
TradingView shows SOL trading in a second bearish session at $173, after failing to hold above $180 on Oct. 30.
Let’s look at the factors behind Solana’s bearishness today.
Decreasing network activity drags down SOL price
SOL’s latest price drop follows a decrease in onchain activity, as fewer users engage with the network, contributing to the decreasing momentum.
Data from DefiLlama reveals the total value locked (TVL) on the Solana network has decreased sharply from $7.2 billion on Oct. 27 to $6.2 billion on Oct. 31. This 13.8% drop suggests that users and developers are interacting less with the network.
Additional data provided by Blockworks Research reveals that SOL’s price drop on Oct. 31 was preceded by a sharp decrease in the network’s economic activity.
The chart below shows that Solana’s real economic value—all revenue sources, including base fees, and priority fees—dropped from an all-time high of $11.1 million on Oct. 24 to the current level of $7 million.
Solana memecoins in the red
Solana’s rally on Oct. 31 coincides with an ongoing correction in the prices of memecoins on its network. Most are posting significant daily losses, as shown in the figure below.
For instance, Dogwifhat WIF$2.57, the leading Solana memecoin by market capitalization, has dropped by over 1.4% over a 24-hour timeframe. Similarly, Bonk BONK$0.00002093, Cat in a Dogs World MEW$0.009282, and Book of Meme BOME$0.008545 have declined 5.3%, 4.9% and 3.6%, respectively, over the past day, according to data from CoinGecko.
The largest daily losses were witnessed by holders of Gigachad (GIGA) and Goatsues Maximus (GOAT), which are down 8.7% and 7% on the day.
Additional data from CoinMarketCap reveals that the overall market capitalization of all Solana-based tokens has dropped from $277.9 billion on Oct. 31 to $275.2 on Oct. 31. The total trading volume has also dropped by 25.7% over the same period.
Investors therefore likely reacted negatively to the dropping value and market activity of tokens within the Solana ecosystem, resulting in the drop in SOL price.
SOL’s bearish divergence
SOL’s drop today precedes a period of growing bearish divergence between its price and the relative strength index (RSI).
Notably, SOL’s price rose between Oct. 24 and Oct. 29, forming higher highs. But, in the same period, its daily RSI descended, forming lower highs.
As a rule of technical analysis, a divergence between rising prices and a falling RSI indicates weakness in the prevailing uptrend, prompting traders to sell more at local highs.
The rise in the price also led to overbought conditions on Oct. 24 when the RSI hit 72, occasioning a correction as buyer exhaustion and profit-booking set in.
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