3 Key Reasons Why Solana (SOL) Price Has Fallen 50% From Its All-Time High

Solana's price has experienced a significant 50% decline since its all-time high of $295 on January 19, 2025. As of now, SOL is trading at around $142.48. This drop follows a steep 42% drawdown in February, marking its largest monthly decline since the FTX collapse in November 2022. While various factors, including the uncertainty surrounding Solana's 11.2 million token unlock and the LIBRA memecoin scandal, may have contributed to this downturn, there are more fundamental reasons at play that provide a clearer picture of the price correction.

1. Solana's Total Value Locked (TVL) Takes a Major Hit

One of the most significant factors behind Solana's price decline is its shrinking Total Value Locked (TVL) in DeFi protocols. In January 2025, Solana's TVL surpassed an impressive $10 billion, reaching a peak of $12 billion. However, since hitting that high, it has dropped dramatically to just $7.13 billion, according to data from DefiLlama.

This drop can be largely attributed to a 60% decline in the TVL of Raydium, one of Solana’s major decentralized exchanges, within just one month. Other significant decentralized applications (dApps) such as Jupiter DEX, Jito Liquid Staking, and Kamino Lending have also seen decreases in their TVLs, with declines of 25%, 46%, and 33%, respectively.

These decreases in TVL have directly impacted Solana's on-chain activity. Weekly transaction volumes, which had reached $97 billion in the second week of January, have plummeted to just $7 billion. This sharp decline in activity suggests that trust in Solana's ecosystem is waning, further contributing to the market's bearish sentiment.

2. $500 Million in Liquidity Flows to Ethereum, Arbitrum, and Other Blockchains

As Solana's activity has diminished, traders have sought more stable alternatives, shifting substantial liquidity to other blockchain ecosystems. Over the past 30 days, nearly $500 million has been bridged to networks like Ethereum, Arbitrum, and other chains. These blockchains have become the preferred destinations for liquidity as traders move away from Solana’s ecosystem.

Crypto analyst Miles Deutscher noted that Solana’s fee burn, a key metric indicating network usage, has dropped to its lowest value in a month, falling to just $177,000. He commented that "people are tired of getting burned at the casino," reflecting the growing sentiment that Solana's network may no longer offer the same potential for returns or reliability.

This liquidity migration highlights the shift in investor sentiment, as Solana struggles to maintain the interest of traders who are now flocking to other chains with more stable and proven track records.

3. The Collapse of the Memecoin Meta

Solana’s price surge in late 2024 was, in part, fueled by the rise of the memecoin market. At its peak, the combined market cap of Solana-based memecoins reached a staggering $25 billion in December. However, this memecoin hype has since evaporated, with the market cap of these tokens now sitting at just $8.3 billion—an alarming 23% drop in the past 24 hours alone.

A major contributor to this collapse was the $550 million generated by Pump.fun, which launched 7.5 million memecoin tokens. The value of many of these tokens has since tanked, with most seeing declines of 80% to 90%. While Solana itself is not a memecoin, the rise and fall of these speculative assets has greatly affected the overall perception of Solana’s market valuation.

With memecoins no longer driving speculative interest, the momentum that once lifted Solana’s price has diminished, contributing further to the price correction.

Conclusion

Solana's sharp 50% decline from its all-time high is not a coincidence but a result of multiple interconnected factors. A significant drop in Total Value Locked, a shift in liquidity to more established blockchains, and the collapse of the memecoin market have all contributed to the ongoing bearish trend for SOL. While Solana continues to maintain its position as one of the leading blockchain projects, these challenges highlight the volatility and risks associated with investing in crypto space.

As Solana works to address these issues and regain market trust, it remains to be seen whether it can rebound or if the broader crypto market will continue to move towards more stable alternatives.