After hitting an all-time high of $261 in January, Solana (SOL) has dropped nearly 60% amid the fading excitement of the meme coin market that once propelled its growth. As SOL trades below the $183 support-turned-resistance price level for the first time since November, questions arise about whether the blockchain's reliance on speculative trading can sustain its momentum.
Meme Coin Mania and Solana's Decline
Recently, Solana has been a major player in the crypto space recently, but its surge in popularity has largely been driven by the speculative minting of meme coins. Unfortunately, the vast majority of these tokens lacked utility and were often part of pump-and-dump schemes that led to significant losses for retail investors.
As the meme coin bubble bursts, Solana's price has fallen sharply, reflecting the end of this speculative craze. The general decline in the digital asset market has exacerbated the situation.
At the time of this publication, SOL traded at $162, representing an 8% and 18% decline in the past day and week, respectively. On the other hand, Bitcoin traded for $94,502, far below the $100K milestone, while Ethereum changed hands for $2,630 after a 3% decline in the past day.
Interestingly, Solana's involvement with tokens like MELANIA and LIBRA fueled its volatility and insider trading. However, the resulting pump-and-dump cycles led to significant liquidations, pushing the price of SOL down.
Technically, SOL is oversold, with the Relative Strength Index at 28. This means that the price could be due for a price pullback before further downward movement. SOL is trading below the 50 and 200 moving averages, with the next support level at $135.
Insiders and Retail Losses
Critics have been quick to highlight that the flaws in the meme coin launches on Solana. Insider trading, where early participants sold off their holdings to retail investors at inflated prices, played a major role in the market downturn, CryptoPotato reported.
Cboe files 19b-4s for both VanEck & 21Shares Solana ETFs...Once SEC acknowledges these filings, the decision clock starts ticking. https://t.co/JsRBLjudyT pic.twitter.com/94RLLEiwbU
— Nate Geraci (@NateGeraci) July 8, 2024
Solana's meme coins have highlighted how unchecked speculation can distort a market. Despite this, some analysts argue that the speculative activity is part of a larger trend that may not disappear anytime soon.
Solana's platform continues to attract users due to its affordability and ease of use, making it a magnet for high-frequency trading and retail speculation. Much of this revenue is driven by retail speculation, but it indicates that Solana is still playing a significant role in on-chain activity. While Solana's current struggles are undeniable, the blockchain's revenue-generating capabilities remain impressive.
Despite these concerns, institutional interest in Solana continues to grow. Recently, investment firms, including VanEck and Bitwise, filed proposals with the CBOE for Solana-based exchange-traded products.
This article was written by Jared Kirui at www.financemagnates.com.
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