Solana (SOL), once a high-flying star in the cryptocurrency market, has hit a rough patch. On February 25, the native token dropped to $131.90 — its lowest level in five months. This sharp decline triggered over $129 million in liquidated long futures positions, shaking investor confidence. Although SOL briefly recovered to $140, it remains down 17% since February 22, significantly underperforming the broader altcoin market, which saw an average drop of just 10% during the same period.
Multiple on-chain, derivatives, and macro-level indicators suggest that Solana may continue to face headwinds in the near term. From declining decentralized exchange volumes to weakening trader sentiment and rising inflation pressure, several structural factors are converging to suppress price momentum.
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Declining On-Chain Activity Signals Weaker Network Demand
One of the most telling signs of Solana’s current weakness is the sharp drop in on-chain activity. Over the past seven days, trading volume across decentralized exchanges (DEXs) on the Solana network has fallen by 30%, reaching its lowest point since October 2025.
Key platforms have reported significant declines:
- Meteora: Trading activity dropped 48% week-over-week
- Raydium: Down 28%
- Pump.fun (a popular meme coin launchpad): Volume declined by 35%
This widespread pullback indicates a broader loss of user engagement across the ecosystem. Even sectors beyond speculative trading — such as liquid staking, yield strategies, NFT lending, gambling dApps, and Web3 infrastructure — are seeing reduced participation.
For example:
- Jito, a leading liquid staking protocol, saw active addresses fall by 49%
- Fragmetic, a yield optimization platform, experienced a 30% drop
- Save, a DeFi savings protocol, lost 28% in user activity
In contrast, Ethereum-based DEX volume surged by 40% during the same period, highlighting a shift in capital and developer focus back toward more established ecosystems.
Derivatives Market Reflects Bearish Sentiment
The futures market tells a similarly bearish story. Demand for leveraged long (buy) positions on SOL has dropped to its lowest level in 12 months. Typically, perpetual and monthly futures contracts trade at a premium to spot prices — usually between 5% and 10% — reflecting bullish expectations and funding incentives.
However, on February 24, Solana futures entered contango reversal, flipping into backwardation (or "discount" mode), where futures trade below spot prices. This shift signals growing dominance of short-sellers and waning confidence among institutional and professional traders.
According to CoinGlass data:
- Total open interest in SOL futures fell from 31.6 million SOL on February 24 to 28.9 million SOL the next day — an 8.5% decline
- Over $129 million in long positions were liquidated within 24 hours following the price drop
Such a rapid contraction in open interest often precedes extended consolidation phases, especially when combined with negative sentiment across social and technical channels.
Inflation Pressure and ETF Uncertainty Weigh on Outlook
Another critical factor weighing on Solana’s price is increasing inflation pressure within its token economy. Unlike deflationary models seen in some other blockchains, Solana’s issuance schedule continues to release new tokens, which can dilute holder value if demand doesn’t keep pace.
With on-chain activity slowing and new user acquisition stalling, the supply-side pressure becomes more pronounced. Without strong utility growth or buyback mechanisms, this dynamic could limit upside potential until usage rebounds meaningfully.
Additionally, hopes for a spot Solana ETF in the U.S. have dimmed recently. While Bitcoin and Ethereum ETFs have gained regulatory approval, Solana has not yet been cleared by the SEC. Recent developments — including Bybit’s security breach and OKX’s settlement with the U.S. Department of Justice — have further clouded the regulatory outlook for projects associated with major exchanges.
These events may have indirectly impacted market perception of Solana’s compliance readiness and institutional viability.
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FAQ: Understanding Solana’s Current Challenges
Why is Solana underperforming other altcoins?
Solana’s recent underperformance stems from a combination of declining on-chain activity, weakening derivatives sentiment, ongoing token inflation, and reduced expectations for a U.S.-based ETF approval. Unlike Ethereum, which maintains strong developer and institutional support, Solana’s ecosystem growth has slowed post-meme coin boom.
Is low DEX volume a reliable indicator of ecosystem health?
Yes. Decentralized exchange volume reflects real user engagement and capital flow within a blockchain. A sustained drop — especially across multiple platforms like Meteora, Raydium, and Pump.fun — suggests declining interest and reduced organic demand for the network’s services.
What does backwardation in futures mean for SOL price?
Backwardation (when futures trade below spot price) typically indicates bearish sentiment. It shows that traders are unwilling to pay a premium for future exposure, often due to concerns about short-term price declines or lack of confidence in recovery. This condition can discourage new leverage positions and prolong downtrends.
Could Solana recover later in 2025?
A recovery is possible if key metrics rebound — including DEX volume, active addresses, and developer activity. Additionally, renewed speculation around a potential ETF filing or major protocol upgrade could reignite investor interest. However, such catalysts are not yet visible in current data.
How does inflation affect SOL holders?
Solana’s current inflation model increases the total supply of SOL over time. If demand doesn’t grow proportionally, this can lead to downward price pressure. Long-term holders may see diluted returns unless usage growth drives stronger utility-based demand.
What should traders watch for signs of a turnaround?
Key indicators include:
- Rising DEX trading volume
- Increasing open interest in futures markets
- Growth in active wallets and staking participation
- Positive regulatory news or ETF filings
- Resumption of developer activity and new project launches
Despite its past successes, Solana now faces a critical phase of ecosystem maturation. The current downturn isn’t just price-driven — it reflects deeper structural issues that will require sustained innovation and user retention to overcome.
While short-term recovery remains unlikely given prevailing conditions, investors should monitor on-chain fundamentals closely. A revival in decentralized application usage or favorable regulatory developments could eventually restore momentum.
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