4 reasons why Solana (SOL) price could rally back to $180

Solana native token, SOL (SOL), is up by 17% after falling to a low of $125 on Feb. 28. However, it encountered strong resistance near the $180 mark. More significantly, the current price of $145 represents a 50% decline from its all-time high of $295 on Jan. 19, raising concerns among traders about SOL’s ability to regain bullish momentum.

While analysts attribute the sharp decline in SOL’s value to the memecoin market crash, onchain activity has declined across various sectors, including liquid staking, tokenized assets, yield aggregators, synthetic perpetuals, NFT marketplaces, and artificial intelligence infrastructure.

Decreased blockchain activity suggests a reduced appetite for SOL, with Solana network fees dropping by 73% compared to four weeks ago, according to DefiLlama data. While the surge in activity was largely driven by memecoin token launches and decentralized exchange (DEX) trading, the result of SOL’s fading momentum remains the same. 

The number of active addresses interacting with Jito, Solana’s largest liquid staking decentralized application, fell by 56% over the past 30 days, as per DappRadar data. Similarly, the NFT marketplace Magic Eden saw a 38% decrease in active addresses, while Save (formerly Solend), which offers collateralized lending, experienced a 42% drop in users over the same period

In comparison, the number of active addresses on Base, the Ethereum layer-2 blockchain, declined by just 2% over the same period. Even Ethereum’s base layer outperformed Solana, with the number of addresses engaging with DApps dropping by 17% over 30 days. This suggests that attributing SOL’s underperformance solely to the memecoin bubble burst is less plausible, as other networks did not experience a similar outcome.

Low leverage demand, bots and lack of Trump support limit SOL upside

Another factor limiting SOL’s upside potential is the lack of interest from leveraged traders. The funding rate on SOL perpetual futures has been negative for the past three days, meaning shorts (sellers) are paying to keep their positions open.

The current negative 0.01% 8-hour funding rate is not particularly concerning, as it translates to a mere 0.9% cost per month. However, the lack of interest from leveraged buyers following a 52% drop from its all-time high is not a positive sign for traders’ sentiment. On the other hand, unexpected news, such as the potential approval of a Solana spot exchange-traded fund (ETF) in the United States, could surprise traders and trigger a short-covering rally.  

For some critics, the potential for increased activity on the Solana network is less of a concern. They argue that the narrative surrounding Solana is misleading, as reportedly 95% of the network’s fees came from just 1.3% of users, mainly driven by Wintermute, a market-making firm, and maximum extractable value (MEV) bots.

In short, a “tiny group of users, primarily predatory traders,” benefited from pump-and-dump schemes, according to arndxt, author of the “Threading on the Edge” newsletter. Arndxt claims that memecoin speculation led to sandwich attacks, where a malicious trader detects a pending transaction on a decentralized exchange, places one order before and another after it, and profits from price manipulation between the transactions.

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Part of the reason SOL was unable to reclaim the $180 level is tied to World Liberty Financial, a semi-centralized finance application linked to President Donald Trump’s personal investments. The project has reportedly accumulated positions in Ether (ETH), Wrapped Bitcoin (WBTC), Tron (TRX), Chainlink (LINK), Aave (AAVE), and other cryptocurrencies, but none in SOL, despite the launch of the Official Trump (TRUMP) memecoin on the Solana network.

Therefore, for SOL to regain its bullish momentum, four key areas of concern need to be addressed: onchain activity, leverage demand, MEV bots, and investment from Trump’s project.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.