Solana (SOL) has seen a sharp decline in value, dropping 6.5% in the last 24 hours to reach approximately $127 on 17 March. This downturn aligns with broader losses in the cryptocurrency market. Several factors contribute to the current decline, including waning investor interest in Solana’s decentralized finance (DeFi) ecosystem, decreasing open interest, and negative funding rates.

Declining DeFi Activity Weighs on SOL

A significant factor behind SOL’s price drop is the reduction in the total value locked (TVL) within its DeFi applications. According to DefiLlama data, Solana’s TVL has been on a downward trend since mid-January.

SOL futures open interest. Source: CoinGlass

• TVL has fallen by 45.5%, from $12.1 billion on 19 January to $6.63 billion on 11 March.
• By 17 March, the TVL stood at $7 billion, marking a 41% decline from its peak earlier in the year.
• This drop in TVL has mirrored a 56% decline in SOL’s price over the same period.

Several major Solana-based layer-2 protocols, such as Jito and Raydium, have suffered 30% and 32% declines in TVL, respectively, over the last month. The dwindling TVL highlights reduced trader interest, raising concerns about Solana’s ability to attract new users despite its lower transaction costs.

Onchain Activity Falls as Transactions Decline

Alongside the decline in TVL, on-chain activity within the Solana ecosystem has also weakened. Data from Dune dashboard Pump.fun indicates a significant drop in network transactions, which preceded SOL’s recent price dip.

• The number of daily transactions on the Solana blockchain has plunged from an all-time high of 71,738 on 23 January to 24,505 on 17 March.
• This reduction in network activity has led to lower transaction fee revenues, further weighing on SOL’s price performance.

With fewer transactions taking place, Solana’s blockchain is generating less revenue, negatively impacting investor confidence and contributing to the ongoing market correction.

Negative Funding Rates and Declining Open Interest

Another critical indicator of SOL’s struggle is the reduction in open interest (OI) in the futures market and persistently negative funding rates.

• Solana’s OI has dropped from a local peak of $8.57 billion on 17 January to $4.03 billion as of 17 March.
• A decrease in OI suggests that more traders are closing their positions, signalling lower speculative demand and reducing bullish momentum.
• SOL’s weekly funding rates remain negative at -0.10%, a significant contrast from their peak of 1.37% four months ago.

Negative funding rates indicate that short sellers are paying long traders to maintain their positions, suggesting bearish sentiment in the market. The combination of declining OI and negative funding rates reflects a lack of confidence in SOL’s short-term price trajectory.

Further Downside Possible for SOL Price

Currently, SOL is trading 56% below its all-time high of around $294, recorded on 19 January. Technical indicators suggest further downside risks if bearish trends persist.

SOL/USD daily chart.

• SOL has struggled to surpass $135, facing resistance at this level.
• If the price falls below $120, the SOL/USDT pair could drop to $110, a support level established on 5 August 2025.
• A break below $110 could trigger further declines to $100 and potentially $80, marking a 35% drop from the current price.

However, some relief may be on the horizon, as a positive divergence in the Relative Strength Index (RSI) suggests that bulls have been accumulating SOL at lower levels.

• A break and close above $140 would indicate reduced selling pressure, potentially pushing SOL towards the 50-day simple moving average (SMA) at $171.
• If SOL reaches this level, bears are expected to put up strong resistance, potentially halting any further recovery.

For now, SOL’s price remains under pressure, with market participants closely watching support levels for signs of stability or further declines.