Key Takeaways
- •Solana's activity growth has not offset falling leverage demand and weak network fees, limiting short-term bullish prospects for SOL.
- •A short squeeze to $160 requires stronger derivatives support and increased investor conviction amidst ongoing macroeconomic uncertainty.
Market Performance and Investor Sentiment
Solana's native token, SOL, failed to reclaim the $140 mark on Monday, despite recovering some of its recent losses. A negative funding rate in SOL perpetual futures and declining on-chain activity across the Solana network continued to weigh on investor sentiment. SOL remains down 30% over the past 30 days, underperforming the broader altcoin market. Traders are now assessing the likelihood of a sustainable bullish trend.
Much of the prevailing concern among cryptocurrency investors stems from declining confidence in the United States economy, following signs of labor-market weakness and an increasing reliance on artificial intelligence investments. The CEO of Deutsche Bank’s DWS asset manager told Reuters that there is "no playbook" for valuing the AI sector, adding that more evidence is required beyond efficiency gains to support elevated valuations.
Following a record 43-day US government funding shutdown, several consumer companies reduced sales expectations after weaker-than-anticipated earnings, including Target, Home Depot, and McDonald’s. With the release of the US October Consumer Price Index (CPI) and unemployment data canceled, traders had even less visibility regarding the Federal Reserve’s monetary policy decision scheduled for December 10.
Derivatives Market Pressure and Fading Network Activity
SOL's weakness reflects a broader decline in risk appetite, but additional factors likely contributed to its underperformance relative to major altcoins. The successful launch of XRP exchange-traded funds (ETFs) in the US increased competition for institutional flows, and launches tied to other cryptocurrencies, including Litecoin and Chainlink, are expected to follow.
Demand for bearish leverage on SOL perpetual futures has been persistent since Friday, as the funding rate turned negative. This indicates that traders are paying to maintain positions that benefit from further price declines. Under neutral conditions, this indicator typically ranges between 6% and 12% to account for opportunity costs. Aggregate SOL futures open interest has fallen 27% over the past 30 days, indicating reduced demand for leverage.
The premium on SOL monthly futures relative to spot prices has dropped to 0%, a level consistent with highly bearish market conditions. In a neutral environment, this metric generally ranges from 5% to 10%, while negative readings signal a sharp absence of demand for bullish exposure. Bearish sentiment is likely to persist until conditions in SOL derivatives markets show a meaningful improvement.
The total value locked (TVL) on the Solana network declined to $10.5 billion on Monday, a 20% drop compared with one month earlier. Blockchain revenue, measured by weekly fees, has fallen to its lowest level since May, which helps explain why SOL has lagged behind the broader altcoin market. For comparison, Ethereum’s weekly fees are down only 5% over the same 30-day period.
Solana remains the clear leader in active addresses and transaction count, maintaining a wide margin over the second-place BNB Chain. More importantly, Nansen data shows a 13% increase in activity on Solana, while its main competitor, Ethereum, recorded a 15% decline. These figures may help reinforce confidence among SOL investors, but they are not, on their own, a catalyst for a sustained bull run.
Outlook for SOL Price
SOL has gained 14% since hitting a low of $121.50 on Friday. However, this rebound does not guarantee lasting upward momentum, particularly as derivatives markets remain fragile and network fees continue to show weakness. A short squeeze toward $160 cannot be ruled out, but it would require a significantly stronger show of confidence from SOL traders.