Solana (SOL) has been unable to reclaim the $89 level due to the rapid closure of bullish derivative bets, which increased its chances of breaking below the $80 support zone.
Coinglass Funding Rate data indicate short sellers have been paying a premium for their bets against the token for more than one week. The funding rate chart shows sustained negative positioning.
Source: Coinglass
CoinGlass data shows that open interest has dropped from roughly $13.5 billion to near $3.4 billion, a 75% drop. This indicates an exodus of capital from leveraged longs.
The closure of derivative bets coincides with declining on-chain fundamentals. According to DefiLlama, Solana DApps generated approximately $22.8 million in weekly revenue, down 25% from the previous week’s $30.4 million.
It is now at its lowest level since October 2024. The decline in staking incentives and overall network demand has negatively correlated with SOL’s price performance.
Source: DeFiLlama
Dependence on Memecoins Affects the Solana Network
A significant amount of the SOL network’s recent DApp revenue came from memecoin launchpad activities. Therefore, the dependence on retail-driven trading cycles (as opposed to the revenue-generating activities from users of decentralized finance applications) continues to weigh heavily on the Solana network.
The SOL network generates less revenue than Ethereum from infrastructure protocol activities (such as lending and block building). As a result, Solana maintains less institutional positioning and less Total Value Locked (TVL).
Additionally, the SOL network continues to experience decreased revenue generation, directly affecting both validator incomes and staking yields. Ultimately, this diminishes the long-term incentives for validators to continue to hold SOL.
Also Read | Solana Bull Flag Expansion Hints at Potential $110 Price Break
ETF Gap Indicates Lesser Institutional Investment into Solana
According to CoinShares, Solana-based ETPs are currently holding around $2.1 billion in assets under management. Meanwhile, SOL’s closest competitor, ETH ETPs, holds over $16 billion.
The significant difference between these two values demonstrates that institutional investors remain skeptical regarding the potential for sustainable revenue generation by Solana.
It also shows skepticism regarding its overall use case. This skepticism further reduces the likelihood of long-term structural demand for SOL during pullbacks in price.
ETF inflows into SOL-based ETPs have been limited. Hence, they cannot serve as a source of price support for Solana as they do for other large-cap tokens by absorbing selling pressure during bear trends.
Source: CoinShares
Derivatives Structure Favors Additional Downside
Negative funding rates and decreasing open interest indicate there is strong conviction among short sellers and little or no new bullish positions being taken. Additionally, SOL has underperformed the broader crypto market over the last month, further confirming the downward momentum for the asset.
Solana must sustainably stay above the $78 to $80 support zone. Otherwise, it could lead to a series of additional liquidations and reinforce the current bear trend.
Source: TradingView
Why This Matters
Falling network revenue and bearish derivatives positioning both decrease demand for SOL, and increase the likelihood of a sustainable break below $80.
Also Read | Solana (SOL) Faces Selling Pressure Sideways Range Before $100 Breakout Target
