A 40% plunge in January, is Solana, the “king of retail investors”, going to fail?

Following Ethereum, Solana also couldn’t escape the market FUD.

If we talk about the most eye-catching public chain in this round of bull market, Solana, which is jokingly called the "computer room chain", is definitely the best choice. The heavy blow brought by FTX has become the soil for Solana's rebirth. With its excellent performance and precise positioning, SOL has created a rare growth miracle by riding the wind of MEME, rising from $8 to a maximum of more than $290, which has stunned the market. Active participants, active funds, and active projects constitute an active ecology, and the slogan of surpassing Ethereum has frequently appeared when talking about Solana.

But recently, the performance of the "king of retail investors" has been less than satisfactory. In the past month, the price of SOL has fallen from the highest price of $295.83 to the current price of $169, with the maximum drop of more than 45%, nearly halving. The sluggish price, the cooling of MEME, and the unlocked tokens are in sharp contrast to the exciting flow of people at the SOL venue at the conference.

One can't help but wonder, is Solana a workable solution or not?

Judging from the price alone, the sluggish performance of SoL is mainly due to two direct causes: MEME and token unlocking. Previously, SOL had made a comeback with the help of MEME and successfully became a big casino on the chain, but the recent MEME circle has disappointed the market.

The root cause is the popular celebrity coins, Trump Coin, Mrs. Trump Coin, and LIBRA, which is closely related to the Argentine president. Celebrities use their influence to harvest and harvest, which makes the market, which is already short of liquidity, feel powerless. In terms of price performance, Trump Coin has fallen 76% from its highest point, with 800,000 people standing guard on the top of the mountain. MELANIA has fallen by 90%. LIBRA, which has a slightly weaker influence, has fallen by 92% to almost zero. Nearly 30% of large investors have taken over at high prices, and more than 70,000 addresses have been harvested.

The threshold for token issuance is too low, and the presidents chose their own MEME between Bitcoin and Ethereum, which undoubtedly shattered the market's confidence in liquidity injection . This sentiment cannot be expressed to the project party, but it is directly reflected in the infrastructure, especially considering the controversy between Jupiter and Meteora in LIBRA, Solana also suffered an unexpected disaster.

Of course, Solana is not completely innocent. Since it became a MEME casino, major institutions, robots, and market makers have made billions of dollars through MEME on Solana. According to statistics from 0xngmi, the founder of DeFiLlama, the total profit is between 3.6 billion and 6.6 billion US dollars, of which MEV (maximum extractable value) is 1.5 billion to 2 billion US dollars, trading robots and applications are 1.09 billion US dollars, automatic market makers are between 0 and 2 billion US dollars, Trump-related insiders are 500 million to 1 billion US dollars, and the Pump.fun platform has also made a lot of money, earning 492 million US dollars.

MEME on Solana has become a cash cow for high-frequency traders, arbitrageurs, and insiders. As the market becomes increasingly sluggish, many people have directly chosen a simpler way to fight back - quitting. According to monitoring by crypto analyst Ali, the number of active addresses on the Solana chain has dropped significantly from 18.5 million in November 2023 to the current 8.4 million, a drop of 54.6%. According to Nansen data, the number of active addresses on February 18 was only 5.17 million, a 30-day drop of 22.37%.

With fewer people, the price of the currency is naturally affected, not to mention that even Bitcoin is now in a half-dead Schrödinger state. However, to fall 40% in a month and become the worst performing token among the top 30 currencies by market value, the impact of the MEME market alone is not enough.

Token unlocking has become another huge obstacle for SOL . As early as last month, anonymous crypto commentator artchick.eth shared Solana's 2025 token unlocking schedule on social media, mentioning that Solana's current token inflation rate is 4.715%, but in the next three months (February-April), more than 15 million SOL tokens worth more than $7 billion will enter the circulation supply. On March 1, the largest amount of unlocking will come, and 11.2 million SOL tokens worth about $2.06 billion will be unlocked.

SOL unlocking schedule, source: artchick.eth

To trace the source of this unlocking, we have to go back to FTX. As part of the bankruptcy process, FTX liquidated 41 million SOL in three auctions. The largest buyer was Galaxy Digital, which bought 25.52 million SOL at $64 per token, accounting for 62.24% of the total. The second largest buyer was Pantera, whose buyer consortium bought 13.67 million SOL at $95 per token, with a return rate of 93%. Other buyers bought 1.8 million SOL at $102 per token.

The unlocking on March 1st was also part of the liquidation of SOL. The only good news is that FTX has started to repay the money on February 18th, and Kraken has completed the first fund distribution of FTX estate and paid more than 46,000 creditors. The creditors are happy, but the SOL holders are quite terrified.

In the current not-so-good market, large amounts of unlocked SOL will inevitably be seen as selling pressure, thus undermining investor confidence. Cryptocurrency trader RunnerXBT bluntly stated that now is a "dangerous" time to buy Solana. He also emphasized that once the SOL unlocking occurs, companies such as Galaxy, Pantera, and Figure will extract unrealized gains of $3 billion, $1 billion, and $150 million, respectively.

The external environment was turbulent and the internal environment was unstable. The market took quick action. In addition to selling for stable assets, short selling became the only option. Not only did the total open interest and funding rate diverge, but the long-short ratio also differed greatly. As the position increased and the funding rate turned negative, the current short-to-long ratio was 4:1, and most positions were added after SOL fell to $190, which means that the new buyers were bearish. The trading data shrank significantly. After reaching a daily trading volume peak of $35.5 billion on January 17, Solana's on-chain activity dropped sharply to $3.1 billion on February 17.

In this context, SOL has also fallen as expected, from $290 on January 19 to a low of $160, a 45% drop in January. Is Solana, the king of retail investors, going to fall?

Interestingly, at the recent Consensus Conference, the Side Event held by Solana was still packed with people and very lively. Having people means attention, and attention in the cryptocurrency circle means capital flow. In sharp contrast, the activities of inscriptions and NFTs, which were once popular concepts, now have only a few participants.

In this regard, most industry professionals still seem to show a strong interest in Solana. In the final analysis, despite all the complaints, the Solana ecosystem is still relatively strong. Looking at its ecosystem, it covers payment, DeFi, LSD, Meme, games, NFT, and DePIN, and many star projects are gathered. In terms of total TVL, SolanaTVL reached US$8.24 billion. Although there is a huge gap compared to Ethereum's US$57.3 billion, it has successfully jumped from the 2023 "no such person" to the second place in the public chain, accounting for 7.72% of the total TVL. It is worth mentioning that in the past two weeks, affected by the unlocking, Solana TVL fell by 19% in these two weeks, and Jito, Kamino, Marinade Finance and Sanctum are rapidly flowing out.

A single chain can return to the top again from below $10. In addition to the so-called technical and positioning advantages, the power of capital is the real invisible hand. Strong Western capital such as A16z, Multicoin, Galaxy, Pantera, etc. constitutes the confidence of the strong market, which also makes Solana like a duck in water in many payment fields. In the previous 2025 forecasts of institutions, without exception, they all expressed high confidence in SOL.

Returning to the fundamentals, except for the increasingly downward trend of MEME, which is difficult to repair, the impact of token unlocking is still relatively controllable in the short term. This unlocking has already begun in early February, and the market has long expected it. The upcoming unlocking only accounts for 2.31% of the total supply and market value. Compared with the spot trading volume of about US$3.6 billion in 24 hours, the selling pressure is not strong. Of course, if the capital party chooses to sell a large amount in the market at one time, SOL will undoubtedly suffer a heavy blow, but for personal profit considerations, the capital party will not choose this method. Most of them will control the frequency of sales. Even if they sell at one time, they will choose the form of OTC to minimize the impact on the market and maximize personal interests. Of course, it may not be completely optimistic. In addition to the unlocking on March 1, there will be more selling pressure in the future starting this year .

Judging from the positive news, there will be another wave of hype for SOL ETF. As of now, five institutions have submitted SOL spot ETFs, namely Grayscale, Bitwise, VanEck, 21Shares and Canary Capital. Although SOL ETF failed last year, with the coming of the new regulator, SOL ETF has ushered in a glimmer of hope. The SEC has accepted the 19b-4 application of Grayscale Solana ETF, and the latest approval date is March 30, but according to general procedures, the SEC usually postpones the acceptance of applications for a maximum of 240 days. In view of the fact that the nature of SOL as a security has been clearly named, the subsequent approval needs to wait and see. In terms of possibility alone, Litecoin and Dogecoin are more likely to be approved, but in any case, as long as the ETF is still under review, the narrative will not stop.

On the other hand, this does not mean that Solana does not have problems. Judging from the current structure, although DeFi and DePin are also hot, Solana is indeed highly dependent on the MEME ecosystem. According to data released by Messari in the fourth quarter of 2024, Solana application revenue jumped from US$268 million in the third quarter to US$840 million in the fourth quarter at the end of the year, an increase of 213%, and this growth was mainly attributed to MEME. Among them, Pump.fun generated revenue of US$235 million in the fourth quarter, and the DeFi trading terminal Photon and the decentralized exchange Raydium recorded revenues of US$140 million and US$74 million, respectively.

Objectively speaking, although MEME has become an important narrative sector of cryptocurrencies with long-term effects, in the final analysis, the MEME carnival still stems from the industry's continued sluggish boom cycle. In other words, MEME is more like a lottery effect in the crypto market, a behavior of betting big with a small investment, and the MEME cycle is a phased product under the background of insufficient liquidity. However, the market is tired of VC-style profiteering, but despite the seemingly fair launch, MEME preemption, insider trading, and banker harvesting can be seen everywhere. This high-frequency, one-wave-like harvesting has, to some extent, seriously damaged the industry ecology. Take LIBRA as an example. The team behind it even tried to establish contact with the President of Nigeria, which means that perhaps presidential tokens will be all over the streets in the future, and there is no way to talk about scarcity.

In this context, Solana's dependence on MEME is too high, and it is inevitable that it will fluctuate with MEME. The market's anger after the LIBRA explosion, the doubts about Jupiter and Meteora, and the blow to SOL all confirm this point. The market's speculative sentiment has been suppressed, and the related SOL is inevitably in danger. Coupled with the most critical unlocking and selling expectations, SOL is continuing to decline.

It is true that, at this stage, Solana is still one of the public chains with the most active funds in the market. Emotional catharsis is unlikely to last too long, and capital-backed Solana is still "doing things". However, in the crypto market full of FUD, the time left for SOL may not be as long as imagined.