The on-chain fundamentals of Solana [SOL] remain resilient.
As of the time of writing, its total locked value (TVL) has increased by 2.67% in the past 24 hours, user retention rates remain stable, protocol-level throughput continues to expand, and the stablecoin growth rate reaching 500% is clear evidence.
Structurally, the ecosystem seems intact. However, the price trends have diverged. SOL fell nearly 10% this week, underperforming its L1 peers and leading the top five in weekly declines.
What is the background? Aggressive deleveraging.
In the past two weeks, open interest has evaporated by more than $4 billion. Interestingly, the open interest evaporation for Ethereum [ETH] reached as high as $10 billion, coupled with continuous outflows from ETFs.
However, Ethereum outperforms Solana in both absolute and relative terms. So, with the SOL/ETH exchange rate still on a downward trend, is there a risk of continued decline for Solana relative to other mainstream currencies?
Solana's hedge fund flows are lagging.
Few data points capture the institutional momentum of Solana better than DeFi Dev Corp. (NASDAQ: DFDV).
In its July earnings report, the company reported a significant quarterly increase in SOL exposure of 91%, currently holding 1.18 million SOL, with a position value of $204 million (quarterly increase of 112%), bringing its total supply to 124,315 SOL.
However, despite the significant increase in Solana's price, it only rose 11.57% this month at closing, while Ethereum rose by 48.76%. Additionally, the SOL/ETH ratio fell by 25% during the same period, marking the worst monthly performance since 2022.
These institutional fund flows are deepening the divergence between SOL and ETH. The higher investment returns of ETH continue to attract smart money, and the number of wallets holding more than 10,000 ETH has also sharply increased.
Meanwhile, Solana's holdings are declining, further weakening its relative strength. Therefore, at the time of writing, the SOL/ETH ratio is retesting a key annual support level on the daily chart.
However, due to the severe rotation of funds towards ETH, the possibility of an ETH crash is very high. With a lack of clear risk triggers, Solana lacks the momentum to recover the psychological barrier of $200.
