Solana has experienced significant decreases in prices as of late, dropping over 30% from its peak in late November.
On December 20, the Solana blockchain SOL, neared a price of $175.00, as indicated by data from TradingView on Coinbase.
By now, the virtual currency had dropped about 32% from its peak of over $257.00 on November 22, according to further data from TradingView provided by Coinbase.
Since that time, the value of the crypto currency has partially rebounded, but it has not been able to regain the majority of its losses from late November, currently trading close to $185 as of now.
Experts have proposed various theories to explain the SOL token’s underperformance, ranging from a natural correction in the market to more alarming engagement on the platform where the token is based.
According to Wendy O, a popular TikTok influencer, Solana’s price has been on a downward trajectory since it surpassed its 2021 record high of $260, briefly reaching a peak of $263.83 on November 22, 2024, before reversing course.
She explained that the reason for this could be a combination of factors, such as Bitcoin not being able to hold onto the $100,000 mark, the year 2024 coming to a close prompting traders and investors to secure profits before 2025, or the overall market cooling off as some uncertainty looms heading into the first quarter of 2025 with the anticipation of a new administration.
“Government Direction Rem
A market analyst noted that although Donald Trump’s potential return to the presidency has given a boost to crypto currency markets, there is considerable uncertainty about the specific impact his reelection would have on the markets once he resumes his role as President.
Recently, Trump announced his intention to appoint Paul Atkins, a former SEC commissioner, to the agency’s highest position.
Atkins, the current CEO of consulting company Patomak Global Partners LLC, is anticipated to adopt a more business-friendly stance on regulations compared to the current SEC Chair Gary Gensler, who is known for his strict approach towards participants in the cryptocurrency and blockchain industries.
Decline in Internet Traffic
A notable levels on the Solana network that has taken place over the past few weeks.
“According to Alex Lin, co-founder and general partner at Reforge, a venture capital firm, Solana’s network has experienced a significant decline in activity and usage since late November, with daily transactions plummeting by nearly 50% since November 20 and a notable decrease in the total value locked in its decentralized finance (DeFi) apps.”
“The decline in network activity is probably due to a change in the conversation surrounding Solana, as newer or alternative platforms such as for their advancements and performance, overshadowing Solana,” he said, referencing the decentralized exchange that has successfully garnered considerable attention.
Liquid is positioning itself as the go-to blockchain for the entire financial sector and has experienced significant investment, with over $1 billion in new funds and a total value locked of $3.2 billion since the launch of its native token just a month ago, although concerns about its centralized nature persist,” Lin noted.
Furthermore, he noted that Solana’s value is more heavily influenced by changes in market attitudes than Bitcoin or Ethereum, as its 2024 growth is largely driven by speculative investments in its ecosystem, including meme-based cryptocurrencies and high-risk trading strategies.
“A Welcome Streamlining”
In addition to the initial theory, the analyst proposed an alternative, more impartial explanation for the recent downturn in the SOL token’s value.
Lin observed that Solana’s price may have been influenced more than usual by market conditions in the past and is currently going through a beneficial adjustment.
Tim Enneking, the managing partner at Psalion, appeared to be in agreement.
He explained that the recent decrease in SOL prices was driven by the rapid and significant movement of markets, especially Solana. He described this phase as a necessary consolidation before the next upward movement, which he viewed as a positive and healthy development.
In order to investigate this issue more deeply, the writer of the article asked if profit collection was the reason behind the decrease in price. Enneking responded that profit collection was indeed a factor in the market stabilization, along with tax implications, especially since the wash sale rule does not apply to crypto currencies.
