SOL, has taken a significant hit, plunging 17% between February 14 and February 18, settling around $164. This sharp decline erased approximately $18 billion from its market value. While some speculate the drop was triggered by the controversial launch of the Libra memecoin, associated with Argentina’s President Javier Milei, deeper market issues appear to be at play.
The Libra memecoin initially surged before crashing 83% as early investors dumped their holdings. However, blaming SOL’s decline solely on this memecoin’s collapse oversimplifies the situation. Solana’s decentralized finance (DeFi) ecosystem had already been weakening, with onchain trading volume declining well before Libra’s launch. Daily trading activity fell dramatically from $35.5 billion on January 17 to just $3.1 billion by February 17.
A significant factor in Solana’s earlier trading surge was the buzz surrounding the Official Trump (TRUMP) memecoin, which soared to a $45 billion market cap after gaining endorsement from former U.S. President Donald Trump. However, as interest in TRUMP and similar memecoins waned, Solana’s trading activity followed suit.
Meanwhile, rival blockchain networks saw contrasting trends. The BNB Chain, for instance, recorded a 35% boost in decentralized exchange (DEX) volume over the past week, surpassing Solana in market dominance. Leading platforms on BNB Chain—such as Thena, Uniswap, and DODO—experienced substantial growth, with Thena doubling its volume, Uniswap climbing 61%, and DODO surging by 53% between February 10 and February 17.
The explosion of celebrity and political memecoins, many of which are fraudulent, has raised concerns about regulatory gaps in the industry. Recently even “Hawk Tuah” girl made the headlines with her own memecoin. Experts argue that the absence of clear oversight has allowed these speculative assets to thrive. The U.S. Securities and Exchange Commission (SEC) has distanced itself from memecoin regulation, leaving agencies like the Commodity Futures Trading Commission (CFTC) or Congress to potentially intervene.
Adding to market anxieties is Solana’s upcoming token unlock schedule for early 2025. Over 15 million SOL—worth more than $2.5 billion—will enter circulation, a figure twelve times larger than the previous quarter’s unlock. While anticipated, this event heightens fears of increased selling pressure and potential further declines in SOL’s value.
In reality, SOL’s recent downturn is more closely tied to weakening onchain trading activity and a decreasing total value locked (TVL) in DeFi projects. These trends had been in motion for weeks before the Libra memecoin launched, making it unlikely that the memecoin alone is responsible for SOL’s struggles.
