Key takeaways:
SOL’s funding rates show cautious sentiment, yet historical patterns highlight potential short-term price gains.
Declining network usage and competition weigh on SOL, though treasury strategies and fundamentals remain supportive.
Solana’s native token, SOL (SOL), dropped to a two-week low of $213 on Tuesday, reflecting heightened risk aversion across the cryptocurrency market. The initial optimism that followed the US interest rate cut on Wednesday quickly dissipated as concerns about the labor market and mounting inflationary pressures resurfaced.
Over a 48-hour span, SOL’s price declined 12%, triggering $112 million in liquidations of leveraged bullish positions, according to CoinGlass data. This abrupt correction has left traders questioning whether the move signals a deeper downside ahead or represents exaggerated fear amid a deteriorating macroeconomic environment.
The funding rate for SOL perpetual futures hovered near zero on Tuesday, highlighting limited demand for leveraged long positions. Under neutral market conditions, this indicator typically ranges between 6% and 12%, meaning buyers are the ones paying to maintain exposure. The last major period of excessive optimism occurred on Aug. 14, when the funding rate surged to 30%, indicating heavy bullish leverage.
When SOL briefly touched $253 on Thursday, the funding rate remained neutral, suggesting traders were hesitant to add further upside bets. Still, the absence of leverage demand in derivatives markets does not necessarily imply outright bearish expectations.
On Aug. 19, the SOL funding rate flipped negative after a 13.5% decline over five days. Yet the $176 level ultimately proved a strong entry point as SOL rallied to $206 on Aug. 24. A similar trend unfolded earlier: the negative funding rate on Aug. 4 was followed by a 19% drop in six days, which also became a buying opportunity as SOL rebounded 25% by Aug. 14.
SOL price drop aligns with declining network activity and new competitors
Part of the muted enthusiasm around SOL can be explained by declining activity on the Solana network, as traders increasingly shift attention to derivatives trading on Aster. The platform, launched on BNB Chain by YZI Labs (formerly Binance Labs), markets itself as free of maximal extractable value and has been openly endorsed by Binance founder Changpeng Zhao.
Over the past seven days, active addresses on Solana dropped 28% while network fees declined by 15%. By contrast, Ethereum’s fees rose 28% during the same period, and BNB Chain saw a 74% increase. The arrival of competitors such as Hyperliquid has challenged Solana’s perceived advantages, especially as Aster’s documentation references the development of its own blockchain.
Still, downside risk for SOL may be limited as more companies pursue strategies to build strategic cryptocurrency reserves. The latest move came from Australia-based Fitell Corp (FTEL), which issued a $100 million convertible note to support the launch of a “Solana treasury strategy.” According to the company, the plan is to generate yield by deploying a combination of onchain and derivatives strategies.
Broader market conditions have also weighed on sentiment. Concerns over rising inflation and a weakening US labor market were underscored by US Federal Reserve Chair Jerome Powell on Tuesday, prompting the tech-heavy Nasdaq index to close 1% lower that day. Heightened risk aversion has cut cryptocurrency market capitalization by $178 billion since Sunday.
Related: E*Trade to add Bitcoin, Ether, Solana in Morgan Stanley’s crypto expansion
There is no clear indication that SOL traders expect a $200 retest based solely on negative perpetual futures funding rates. The Solana network continues to lead in the number of transactions and active addresses, while ranking second in total value locked (TVL), according to DefiLlama metrics. These metrics strengthen the case for a potential price recovery as risk appetite gradually returns.
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.
