Solana (SOL) Price Faces Decline Amid DeFi Struggles and Waning User Interest

Solana’s (SOL) price has taken a noticeable hit today, dropping by 6.5% in the last 24 hours to hover around $127 on March 17. This downturn follows broader market losses in the cryptocurrency space, but the primary factors driving the decline are specific to Solana’s ecosystem. Decreasing interest in Solana’s decentralized finance (DeFi) applications, negative funding rates, and weakening on-chain activity have raised concerns about its short-term price trajectory.

Decreasing DeFi Activity: Solana’s TVL Drops to Four-Month Lows

The recent price drop for Solana comes on the heels of a significant decline in the total value locked (TVL) across its DeFi ecosystem. According to data from DefiLlama, Solana’s TVL has been in a downward trend since mid-January, falling by 45.5%, from $12.1 billion on January 19 to $6.63 billion by March 11. As of March 17, the TVL is at $7 billion, marking a 41% decrease from its peak in mid-January.

This decline in TVL mirrors SOL’s price drop over the same period, which has seen a 56% decrease since January. Layer-2 protocols within Solana, such as Jito and Raydium, have experienced TVL reductions of 30% and 32% over the last 30 days. This suggests that there is waning interest among traders and investors in Solana’s DeFi applications, raising questions about the blockchain’s ability to retain users despite its low transaction costs and fast processing times.

Lower On-Chain Activity Drives SOL Price Down

In addition to the TVL drop, Solana has seen a marked decline in on-chain activity, which further contributes to its price struggles. According to data from the Dune dashboard Pump.fun, daily transaction volume on Solana’s network has fallen sharply. On January 23, Solana recorded an all-time high of 71,738 transactions per day, but by March 17, this number had plummeted to just 24,505.

The decline in transactions has a direct impact on revenue generated from network fees, which, in turn, negatively affects SOL’s price. A reduction in network activity typically signals lower user engagement, contributing to the ongoing correction in SOL’s price. As fewer transactions occur on the blockchain, investor sentiment weakens, further suppressing demand for SOL.

Futures Market Sentiment Deteriorates: Negative Funding Rates and Decreasing Open Interest

The futures market data also reflects a lack of confidence in Solana’s short-term price outlook. Solana’s open interest (OI), which represents the total value of outstanding futures contracts, has dropped from a peak of $8.57 billion on January 17 to $4.03 billion as of March 17. A decrease in OI suggests that traders are closing positions, signaling a slowdown in speculative demand.

Furthermore, SOL’s weekly funding rates remain negative at -0.10% on March 17, compared to a peak of 1.37% four months earlier. Negative funding rates mean that traders who are shorting Solana are paying those holding long positions to keep their contracts open. This indicates that the market sentiment remains bearish, with participants lacking faith in a near-term price recovery.

Technical Analysis Suggests Further Price Decline

Technicals point to the possibility of further downside for Solana. The altcoin is currently trading 56% below its all-time high of $294, achieved on January 19. Key support levels are critical to watch in the coming days.

Currently, SOL has been unable to break above the $135 level, and if it falls below the $120 mark, it could face further declines. A break of $120 could trigger a downward move to the $110 range, a support level established on August 5, 2025. If the price continues to slide, it could eventually approach the $100 and $80 levels, marking a potential 35% drop from the current price.

However, there is a glimmer of hope for the bulls. A positive divergence in the Relative Strength Index (RSI) suggests that some buyers are accumulating SOL at lower levels. If Solana can break above the psychological $140 resistance level, it may signal a reduction in selling pressure, potentially leading to a rally toward the 50-day simple moving average at $171. This level is expected to face strong resistance from bears.

Conclusion: Solana’s Outlook Remains Uncertain

While Solana’s price has faced significant challenges recently, its future performance hinges on several key factors. The declining interest in its DeFi ecosystem, coupled with reduced on-chain activity and negative sentiment in the futures market, suggests that further price drops may be possible. However, technical indicators and the potential for accumulation at lower levels could provide some hope for a rebound.

Traders and investors will need to keep a close eye on Solana’s price action and the broader market sentiment to determine whether the blockchain can regain momentum and avoid further losses.