Solana (SOL) Price Declines, Network Activity Strong

Solana’s native token, SOL, has seen a decline of 9.8% between Jan. 30 and Feb. 1, failing to surpass the $104 resistance level for the fifth time in four weeks. Over a longer period of 30 days, SOL dropped by 10.7%, while Ether and BNB experienced smaller declines of 1.2% and 2.6% respectively. This has raised questions among investors about the reasons behind SOL’s underperformance, despite the strong fundamentals of the Solana network.

The cryptocurrency market as a whole has been under pressure since the U.S. Federal Reserve decided to keep interest rates unchanged at 5.25% on Jan. 31. This decision, along with concerns about the crisis in U.S. regional banks, has led to a decrease in investor confidence. Shares of New York Community Bancorp (NYCB) have dropped 42% since Jan. 30 after reporting a $260 million loss in the fourth quarter of 2023. The contagion risk associated with these banks has caused concern among traders and investors, who fear that this could have a negative impact on Bitcoin.

BitMEX co-founder Arthur Hayes predicts a negative initial impact on Bitcoin if the Fed does not provide a quick bailout. He believes that the aftermath effect on cryptocurrencies could be positive, as investors will expect higher inflation. Whether the stimulus package comes from a renewed Bank Term Funding Program or a cash injection through the New York Department of Financial Services, it would result in more money flowing into the monetary system.

So, why is SOL’s price down? One possible reason could be the $104 resistance level, which is equal to Solana’s market capitalization of $45 billion, matching its competitor BNB. BNB Chain has a higher total value locked (TVL) of $3.54 billion, compared to Solana’s $1.6 billion. BNB Chain also has a larger number of active addresses engaging with decentralized applications (DApps) and a higher 30-day trading volume.

Although Solana has recently gained attention for the successful launch of the Jupiter decentralized exchange (DEX) aggregator and the JUP airdrop, its network activity is still smaller compared to BNB Chain. Solana’s ecosystem has seen growth in decentralized exchanges, non-fungible token (NFT) marketplaces, yield protocols, games, and liquid staking solutions. It still has to prove itself among the top networks in terms of TVL and trading volumes.

SOL’s underperformance may be attributed to its inability to break above the $104 resistance level and its lower network activity compared to its competitors. While Solana has shown growth in certain areas, it still has a long way to go to surpass the valuation of BNB. Investors will be closely watching its progress in order to determine if SOL can establish itself among the top networks in the cryptocurrency market.