SOL Struggles to Break $145 as the Broader Crypto Market Cools

SOL, the native token of the Solana network, has been unable to close above $145 since July 3. This lackluster performance can be partially explained by

Solana (SOL) has failed to close above $145 since July 3, lagging behind competitors and sparking concerns among traders.

Despite the broader cryptocurrency market experiencing a 5% decline in aggregate market capitalization over nine days, SOL underperformed its competitors.

While BNB BNB and Ether ETH both declined 6.5% between July 3 and July 12, SOL traded down 7.8%. This underperformance has traders fearing that the bearish momentum will continue.

However, Solana’s on-chain metrics and SOL’s derivatives indicate that a reversal may be underway.

Some Solana SPL tokens drastically underperformed, which also explains the reduced demand for SOL.

When Solana ecosystem participants lose money, less money circulates in its decentralized applications, consequently egatively impacting the demand for SOL. Highlights between July 3 and July 12 include a 24% decline in DogWifHat (WIF), 18% losses in Helium (HNT), and an 18% correction in Jito (JTO).

In the grand scheme of things, SOL remains the fourth largest cryptocurrency, excluding stablecoins, boasting a $65 billion market capitalization. To put things in perspective, competitors Toncoin (TON) hold $18.4 billion, Tron TRX stands at $12 billion, and Avalanche AVAX at $10.1 billion.

Furthermore, the total value locked (TVL) in Solana matched the BNB Chain for the first time ever on July 5, and the gap has been minimal ever since.

According to DefiLlama data, BNB Chain had more than twice Solana’s TVL by the end of 2023. The $2 billion gap favoring BNB Chain is now gone, meaning traders are deploying significantly more capital on the Solana network. Solana’s highlights include liquid staking Jito, holding $1.6 billion in deposits, followed by Marinade with $1.1 billion, and Kamino, also nearing $1.1 billion in TVL.

Tron holds the second position in TVL terms with $7.6 billion, but 72% of that comes from a single decentralized finance (DeFi) application, JustLend. Analysts have strong concerns given that 94% of its deposits come from a wrapped version of Bitcoin, which lacks solid evidence of reserves. In essence, Solana competes directly with BNB Chain for the second place in deposits.

In terms of decentralized applications (DApps) activity, Solana is far from being a top contender, but its metrics improved over the past seven days while most competitors faced declines.

Data indicates that Ethereum, BNB Chain, and Polygon experienced a decline in the number of active users, while Solana gained 19% over the past seven days. Similarly, Solana DApps volumes totaled $703 million in the same period, a 12% increase over the previous seven days. Meanwhile, the market leader competitor Ethereum faced a 37% decline in volumes.

Finally, one should analyze SOL’s futures markets. Perpetual contracts, also referred to as inverse swaps, incorporate an embedded rate recalculated every eight hours. Essentially, a negative rate indicates that shorts (sellers) are using higher leverage.

Notably, the eight-hour funding rate for SOL turned negative between July 5 and July 6, but the indicator is presently near zero, indicating balanced demand between longs (buyers) and shorts. While it is impossible to determine what might cause SOL investors to regain confidence and push its price back to $160, on-chain and derivatives metrics show no signs of stress.