Why are SOL prices down today?

After hitting an ATH of $293 on Jan. 19, SOL has been steadily plunging and losing 40% of its value in just one month. The meme coin craze, which has been Solana's main growth driver over the past few years, is slowly cooling down, causing SOL to continue to plummet.

SOL price drops 10% in just one day

Specifically, in the last 24 hours, the SOL price has fallen by as much as 10%, bringing the value of the currency to $166. This decline is not only reflected in the current value, but also through on-chain indicators and the general sentiment of investors.

On-chain data from Glassnode shows that the number of active addresses on Solana has fallen from 18.5 million in November to about 8.4 million at the time of writing. New addresses on the network also fell sharply in the same period.

Moreover, total weekly trading volume on Solana fell from $97 billion in the second week of January 2025 to just $26 billion last week, reflecting a sharp drop in network activity.

Coinalyze also noted that the ratio of long/short positions on SOL futures exchanges has fallen from 4:1 to 2. 5:1, representing an increase in pessimistic sentiment in the market.

The statement of Tyler Durden, an influential figure in the cryptocurrency community, further reinforces this view: “The market has decided that they are angry with Solana.”

Causes of the decrease in the price of SOL

Users are gradually losing faith in meme coins

The explosion of meme coins on Solana has been the main driving force behind the growth of this network. However, the meme coin ecosystem is showing marked signs of weakening, contributing to SOL's decline.

The recent “rug pull” incident of the LIBRA token is a good example. LIBRA was initially promoted as a project to support small businesses, even supported by Argentine President Javier Milei.

However, this token quickly reveals itself to be a sophisticated scam. After reaching a market capitalization of up to $4.5 billion, LIBRA collapsed disastrously, losing 90% of its value. The incident leaves President Milei at risk of impeachment.

The LIBRA case is not an isolated case. Previously, the TRUMP token has also caused “liquidity sucking”, which affects the flow of circulation in the crypto market.

Notably, the LIBRA incident also exposed hidden corners in the memenoin ecosystem on Solana. Hayden Davis, creator of LIBRA, has allegedly “rug pulled” more than $100 million. The incident also involved other tokens such as MALENIA, CAR, M3M3 and even influential figures in the Solana community.

According to sources, most Solana OGs with extensive market ties were involved, including Jupiter Founder Meow and Meteora's current CEO Ben Chou. These are the two projects with the highest infrastructure revenue on Solana today.

The collapse of the memenoin ecosystem along with scandalous incidents eroded investor confidence in Solana. PESSIMISTIC SENTIMENT IS SWEEPING THE MARKETS, IN PARTICULAR, INVOLVING AT LEAST TWO PRESIDENTS OF TWO COUNTRIES. If investigated at the national level, the severity would likely be comparable to the FTX and LUNA cases.

Pressure from SOL token unlocking

Besides the collapse of the meme coin ecosystem, the upcoming SOL token unlocking is also a factor of concern for investors. More than 15 million SOL tokens, worth more than $7 billion, are expected to hit the market between February and April, increasing Solana's inflation rate to 4,715%.

Of particular note is that 11.2 million SOL tokens from the bankruptcy of the FTX exchange will be unlocked on March 1, 2025, with an estimated total value of up to $2.06 billion. Unlocking such a large amount of SOL tokens can cause significant impacts on the value of this coin.

A combination of negative factors, from the collapse of the memenoin, the scandalous incidents, to the pressure from token unlocking, is creating a storm for Solana. Whether SOL can get through this difficult period remains a big question.