Solana’s native token, SOL , dropped 17% between Feb. 14 and Feb. 18, currently trading near $164. The decline coincided with the launch of the Libra memecoin, which involved Argentina’s President, Javier Milei. Libra saw an 83% price crash after early investors offloaded their holdings.

However, attributing SOL’s $18 billion market cap loss solely to a memecoin pump-and-dump is an oversimplification, especially considering that Solana’s decentralized finance (DeFi) applications had already seen declining volumes and deposits ahead of a major token unlock. Additionally, memecoins broadly followed SOL’s price action, weakening the argument that the sector was the primary driver.

Although memecoins were not directly responsible for SOL’s decline, traders showed reduced interest in decentralized exchanges and new project launches. The lower influx of participants and declining onchain activity negatively impacted SOL’s price, as demand for its native cryptocurrency is driven by decentralized application (DApp) usage.

Solana DEX volumes declined by 91% in 30 days

After peaking at $35.5 billion in daily volume on Jan. 17, onchain activity on Solana has dropped sharply to $3.1 billion on Feb. 17. The surge was initially driven by the hype around the Official Trump (TRUMP) memecoin, which reached a $15 billion market cap following public endorsement from US President Donald Trump.

Despite Solana’s 20% weekly decline in DEX volume, some competitors saw different outcomes. BNB Chain, for instance, gained 35% over the past week, surpassing Solana as the market leader. Key contributors included Thena, which doubled its volume, Uniswap with 61% growth, and DODO, which surged 53% between Feb. 10 and Feb. 17.

Solana TVL drops 19% in 2-weeks ahead of large SOL unlocks

Deposits on Solana’s decentralized applications (DApps), measured by total value locked (TVL), have also underperformed competitors. Notably, this metric is largely unrelated to memecoin trading and token launches, as liquid staking, perpetual contracts, and yield platforms dominate TVL composition.

Deposits on Solana DApps dropped by 19% over two weeks, primarily driven by net outflows from Jito, Kamino, Marinade Finance, and Sanctum. Only a few projects were able to increase their total value locked (TVL) during this period, such as Meteora, a liquidity provision application, and Drift, a cross-margin perpetual futures DEX.

In comparison, Ethereum’s TVL declined by 2% over the same period, while BNB Chain grew by 8%. Notable performers on BNB Chain included the lending platform Venus and the restaking platform Kernel. If the Libra memecoin launch were the primary cause of the recent SOL underperformance, one would expect a more significant impact on Solana’s onchain metrics following the event. However, this was not the case.

Another source of concern for SOL holders is the heavy unlocking schedule for the first quarter of 2025. As reported by Cointelegraph, over 15 million SOL, worth more than $2.5 billion, are expected to enter the circulating supply during this period. While the event should not come as a surprise to investors, it represents 12 times the amount of SOL unlocked in the previous quarter.

Ultimately, SOL’s underperformance can be attributed to a drop in onchain trading activity and a decrease in DApps TVL, a trend that had been developing for several weeks before the launch of the Libra memecoin on Feb. 14.

Additionally, the looming large SOL unlocks fueled the FUD needed to create a bearish sentiment, pushing SOL’s price to its lowest levels since November 2024.