The cryptocurrency market is experiencing significant turbulence this week, with Solana (SOL) facing particularly steep challenges. As the excitement surrounding memecoins wanes, prices have dropped to their lowest levels in several months.
Following the historic hack of the ByBit exchange and President Trump’s controversial tariff proposals, the overall crypto market has seen a downturn, with Bitcoin falling 12% in the past week. In contrast, Solana has plummeted 22%, reaching a new five-month low.
Solana Struggles As New Data Shows Dramatic Drop
As reported by Fortune, the decline in Solana’s value can be attributed to its association with recent celebrity-backed memecoin scandals, particularly the LIBRA incident.
This cryptocurrency surged to a nearly $5 billion market cap before crashing, following promotion from Argentine President Javier Milei, whose involvement has sparked outrage and prompted an investigation.
Zach Pandl, head of research at the crypto asset manager Grayscale, noted that this incident has highlighted the volatility and risks associated with memecoins, stating, “The current phase of memecoin trading on Solana is over.”
Solana’s rise as the preferred blockchain for memecoin development was largely due to its low transaction costs, high transaction speeds, and user-friendly infrastructure.
Platforms like Pump.fun facilitated the rapid creation of cryptocurrencies on Solana, leading to a peak of over 71,000 memecoins launched in a single day. However, this number has since dwindled to just 26,000, according to data from analytics firm Dune.
Analysts Warn Of Potential Drop Below $100
While many memecoins lack intrinsic value and are often linked to scams, Pandl suggested that the recent memecoin frenzy had some positive impacts on the Solana ecosystem.
“It onboarded users, generated revenue, and helped stress test the Solana blockchain in various ways,” he explained. “In that sense, memecoin trading is one of the many building blocks to developing the next generation of financial infrastructure.”
Adding to Solana’s woes, the open interest for Solana futures has declined by 44% over the past month, dropping from an all-time high of $6.39 billion to just $3.57 billion today. This decline indicates a reduction in investor confidence and interest in leveraging Solana positions.
CoinGecko data also shows a similar pattern from investors, as trading volume has dropped 54% in the last 48 hours, representing only $5 billion of Solana’s total market cap of $66 billion.
Currently trading at $134, analysts have identified this price point as a crucial support zone in the ongoing downtrend. According to Crypto General, if this support fails to hold, the next support level could fall below $100, representing a drop of more than 65% from Solana’s all-time highs.
Featured image from DALL-E, chart from TradingView.com
