It's not a good day for $SOL holders, with the token bleeding about 10% in the span of a day. Here's a few possible reasons why the 'Ethereum killer' is losing steam.
Link to Scams
Previously lauded for its speed and scalability, Solana has recently been at the heart of numerous controversies involving fraud and rug pull scams. Projects involving $SHAR, $QUANT, $LIBRA and $MELANIA were launched on Solana, and most (if not all) of them have been largely criticised by investors and analysts for being deliberate rug pulls, with investors collectively losing millions of dollars. Multiple fraudulent occurrences on Solana have significantly heightened skepticism with regard to the platform, especially when investor trust is of paramount importance in the crypto space.
Diminishing Network Activity
It cannot be understated that Solana’s network activity is diminishing at an alarming pace. Previously standing at 18.5 million last November, the number of active addresses on Solana has dwindled to 8.4 million — a shocking 55% drop within months.
The severity of the situation is further highlighted when we analyse the transfer volume on the Solana network, which has fallen from $2 billion last November to just $26 million — a jaw-dropping slide of 99%.
The sheer magnitude of these numbers could be reflective of fundamental concerns with regard to the network itself.
Network Issues
In recent history, Solana has faced multiple network issues which have led to outages. In fact, it has come to a point where frequent users of the network are not surprised when transaction failures occur.
Since January 2022, the Solana network has experienced about 6 significant outages and around 15 partial or major outage days, with the most recent significant outage happening on February 6, 2024 — lasting almost 5 hours because of a bug that caused an infinite loop error and halted block production.
These issues, in addition to the above two factors, have caused Solana to lose a great amount of reliability amongst network users and investors.
Presence of Competitors
Apart from Ethereum, Solana faces competition from multiple players in the space, including but not limited to BNB Chain ($BNB ), Cardano ($ADA ), Avalanche ($AVAX) and Fantom ($FTM). In today's cryptocurrency landscape, processing transactions at high speeds and low fees is a feat that multiple networks are capable of. Solana needs to not just resolve issues surrounding the network's stability and credibility, but also find ways to remain competitive.
A Final Word
All in all, this is by no means a sell signal for the Solana token, nor is it meant to condemn the token or network. It's simply an article explaining plausible reasons behind the significant drop in the token's price. Whether the Solana network can pick up on its activity and credibility in the coming months remains to be seen. As a holder of Solana token (though a negligible amount), I sincerely do hope it can weather this storm. Yet, truth be told, the road ahead for Solana isn't going to be the smoothest.
