The Solana ecosystem experienced a significant surge late last year, primarily driven by the SOL token and meme coins. However, it is now undergoing a sharp downward correction.
Solana meme coins like BONK and WIF, which had seen tremendous growth in the past three months, have faced substantial declines. BONK, for example, has dropped by 65% from its peak, while dogwifhat (WIF) has collapsed by 80%, despite previously offering substantial returns for early investors.
The frenzy began when the Solana network gained more attention, and the bonk token rallied for several weeks, leading to listings on major exchanges such as Binance and Coinbase. Additionally, Solana’s native token, SOL, briefly exceeded the market capitalization of other major cryptocurrencies like BNB. Solana quickly became a popular choice for on-chain traders, with trading volumes and fees surpassing those of Ethereum at some point.
Solana’s reputation for fast and inexpensive transactions, along with the allure of new meme coins, fueled its rapid growth starting in mid-September before the more general altcoin rallies that occurred in October, and it also outlasted them by enduring an upward run until mid-December. The surge in value locked in Solana applications also coincided with this growth, reaching $1.3 billion from $400 million in November, approaching levels last seen since July 2022. However, overinflated valuations led to profit-taking and a decline by late December, with new token launches losing momentum and capital moving to other blockchain opportunities.
Solana’s SOL Price Trajectory Also Affects Memecoins and Other Network Activities
The rise of Solana can be attributed to the increasing demand for efficient and cost-effective blockchain networks. With its fast transaction speeds, Solana attracted traders seeking a smooth trading experience.
This momentum spilled over into its meme coins. It also outperformed other major layer-1 cryptocurrencies by the end of December, with SOL rallying from $18 in mid-September to a high of $125 by mid-December, representing a remarkable 600% return in just three months. However, prices have since corrected, dropping by 32% from around $126 to the current level of $85.
Technical analysis suggests that there may be support around $78, which has historically been a strong zone on the daily and weekly charts. Failing to hold this support will lead to further declines, putting additional pressure on associated meme coins as investors move away from risky assets. On the other hand, a rebound at this level could reignite new interest in Solana and the tokens built on it.
The quick rise and fall in SOL and Solana meme coins demonstrate how unpredictable things can be in the crypto market. Although the Solana network has its advantages with fast transactions and cost savings, it will need more widespread use and practical applications to justify the extremely high values from the last few months. This will likely take time to happen, so we can expect more cycles of rapid growth and sudden declines as the crypto industry continues to mature.
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