Key Points:
The declining trading volume on decentralized exchanges, flat ETP fund flows, and macroeconomic uncertainty are suppressing Solana's price and limiting the market's preference for bullish positions.
Increased competition from rival spot altcoin ETFs is intensifying competition, but anticipated government stimulus may reignite demand for Solana.
Solana fell 6% after facing rejection at $147 on Thursday. Following weak U.S. employment market data and sluggish consumer sentiment, investors' risk appetite has turned cautious.
Traders are concerned that Solana's return to the $200 mark may take longer than expected, especially after leveraged traders were liquidated in October and November, while Solana's network activity continues to decline.
Solana's total value locked (TVL) has dropped from $13.3 billion two months ago to $10.8 billion. Several leading projects in the ecosystem, including Kamino, Jupiter, Jito, and Drift, have seen deposits decline by 20% or more. Further pressure comes from a significant drop in trading activity on Solana's decentralized exchanges (DEX).
Despite this, Solana remains the second-largest network by TVL. However, Ethereum still dominates with deposits of $73.2 billion. Its Layer 2 ecosystem—covering Base, Arbitrum, and Polygon—continues to attract substantial capital. Ethereum's Fusaka upgrade on Wednesday improved scalability and wallet management, reducing the incentive for users to migrate funds to competing networks, including Solana.
Solana DEX trading volume reached $19.2 billion in the seven days ending November 30, a 40% decline from the $32 billion recorded four weeks prior. As on-chain activity decreases, investors are concerned about weakening demand for Solana, which could create a negative feedback loop, prompting traders to leave the Solana ecosystem in search of better opportunities. For example, the newly launched Layer 1 blockchain Monad recorded $1.2 billion in DEX trading volume in its first week.
Solana traders also reacted to a report from global outplacement firm Challenger, Gray & Christmas, which stated that 71,321 corporate layoffs occurred in November, a level not seen since 2008 except for twice. There is also increasing uncertainty in the consumer financing sector, as several U.S. state attorney general offices have requested details from "buy now, pay later" service providers regarding consumer repayment capabilities.
A PayPal survey indicated that half of shoppers plan to apply for personal loans during the holiday season, raising concerns about tightening credit conditions.
Demand for bullish leverage in SOL futures remains very low, with an annualized funding rate of 4%, below the neutral level of 6%. This weak sentiment is partly due to the lack of inflows into Solana's exchange-traded products. According to a CoinShares report on December 1, Bitcoin, Ethereum, and XRP ETPs attracted a total of $1.06 billion in inflows during the same period.
Other altcoins, such as Ripple, Litecoin, and Dogecoin, have recently received approval for spot ETFs in the U.S., bringing new competition for institutional funds. More Solana competitors are expected to receive spot ETF approvals in the coming months.
Bearish momentum has also reduced the likelihood of publicly traded companies increasing their Solana reserves through new issuances. For example, Forward Industries (FWDI US) holds 6.91 million Solana, which, according to CoinGecko data, is currently trading below its initial investment. Issuing new shares at a price that implies its Solana cost is below its reserve level would dilute existing shareholders' claims to these holdings.
The path for Solana to return to $200 heavily depends on alleviating macroeconomic uncertainty, but as traders anticipate government stimulus measures, Solana shorts may be caught off guard, potentially providing the necessary catalyst for a broader altcoin rally.
This article is for general informational purposes only and does not constitute, nor should it be construed as, legal or investment advice. The views and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and positions of Cointelegraph.
Related: Santiment: Ripple (XRP) sentiment plummets, potentially setting the stage for token price increases
Original article: “Solana (SOL) Price Capped at $140 as Altcoin ETF Rivals Reshape Crypto Demand”
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