Solana (SOL) has dropped to $126, marking its lowest price level since mid-October and a 27% decline over the past week. This downward trend comes amid growing market anticipation of a major token unlock event scheduled for March 1, 2025 — the release of 11.2 million SOL tokens from the FTX bankruptcy estate. Valued at approximately $1.3 billion at current prices, this unlock has sparked concerns over increased selling pressure and further price depreciation.
As investor sentiment turns cautious, on-chain data reveals a dramatic contraction in network activity. Transfer volume on the Solana blockchain has plummeted from $1.99 billion in November 2024 to just $14.57 million — a staggering 99% decline. This sharp reduction signals waning user engagement and reduced confidence in short-term price momentum.
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Declining On-Chain Activity and DeFi Ecosystem Slowdown
The health of any blockchain ecosystem can be measured through key on-chain metrics, and Solana is currently showing signs of cooling across multiple indicators. One of the most telling is Total Value Locked (TVL) in decentralized finance (DeFi) protocols. In mid-January 2025, Solana’s TVL peaked at $12 billion but has since declined to $6.8 billion by February 28 — a drop of over 43% in less than two months.
This exodus from DeFi platforms reflects broader risk-off behavior among investors. Lower TVL typically correlates with reduced staking, yield farming, and liquidity provision — all of which decrease demand for the native SOL token. With fewer incentives to hold or use SOL within DeFi dApps, selling pressure intensifies.
Additionally, memecoin trading — once a major driver of Solana’s popularity and transaction volume — has significantly slowed. The platform had previously benefited from explosive growth in speculative tokens like BONK and WIF, but recent weeks have seen a notable decline in memecoin trading volume, removing a key source of organic demand.
Futures Market Contraction Signals Loss of Leverage
Market leverage is another critical barometer of trader sentiment. According to Coinglass data, open interest in Solana futures has been halved, falling from $7.4 billion in mid-January to $3.7 billion by the end of February. This sharp reduction suggests that traders are either closing long positions or being liquidated due to sustained downward price action.
A shrinking open interest during a downtrend often indicates capitulation — a phase where leveraged traders exit their positions, accelerating price drops. While this can pave the way for eventual stabilization, it also reflects heightened fear and uncertainty in the market.
Bollinger Bands analysis further underscores this volatility. Persistent red candles on SOL’s price chart point to continuous selling pressure, with little sign of sustained buying momentum. The bands themselves have widened, signaling elevated market volatility and potential for sharp moves in either direction.
Technical Outlook: Support Levels Under Pressure
From a technical perspective, Solana has broken below the critical $127 support level, raising concerns about further downside. The Relative Strength Index (RSI) currently sits at 23.92 — well within oversold territory — suggesting that while the asset may be due for a rebound, bearish momentum remains dominant.
Key support zones are now identified at $110 and $100. If selling pressure continues following the March 1 token unlock, these levels could become focal points for traders assessing whether the dip presents a buying opportunity or signals deeper structural weakness.
Resistance levels remain firm at $135 and $145. A reclaim above $145 would be required to restore bullish sentiment, but current market conditions make such a move unlikely in the near term.
Institutional Interest Persists Despite Short-Term Headwinds
Despite the current downturn, institutional interest in Solana remains intact. Asset management giants like VanEck and Franklin Templeton have filed applications for Solana-based exchange-traded funds (ETFs), signaling long-term confidence in the network’s fundamentals.
However, regulatory approval processes are expected to take time, meaning these potential catalysts won’t provide immediate relief to price pressures. In the interim, market dynamics will continue to be driven by supply shocks — such as the upcoming FTX-related unlock — rather than new demand drivers.
Previous distributions from the FTX estate have already placed downward pressure on SOL’s price. Over 41 million SOL tokens have been sold to major crypto firms including Galaxy Digital, Pantera Capital, and Figure. These systematic releases have conditioned the market to anticipate periodic supply influxes, contributing to cautious positioning ahead of each unlock event.
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What to Watch: The March 1 Unlock Event
The release of 11.2 million SOL tokens on March 1 is a pivotal moment for market participants. How these tokens are distributed — whether gradually or dumped en masse — will heavily influence short-term price action.
Historical precedent suggests that large token unlocks often precede or coincide with price declines, especially when combined with weak on-chain fundamentals and declining leverage. Traders will closely monitor exchange inflows and whale wallet movements in the days leading up to the event.
Moreover, trading volume across major exchanges remains subdued, with only $14.57 million in 24-hour volume reported at press time. Low volume during downtrends can amplify price swings, increasing the risk of sudden drops or spikes based on relatively small trades.
FAQ
Q: Why is Solana’s price dropping so sharply?
A: The decline is driven by a combination of factors: anticipation of a large token unlock from the FTX bankruptcy estate, declining on-chain activity, reduced DeFi TVL, and falling futures open interest — all reflecting weak short-term sentiment.
Q: How does the FTX token unlock affect SOL’s price?
A: The release of 11.2 million SOL tokens introduces significant new supply into the market. If sold quickly, it could overwhelm demand and push prices lower, especially in an already bearish environment.
Q: Is Solana oversold?
A: Yes, with an RSI of 23.92, SOL is technically oversold. While this may suggest a potential rebound, oversold conditions can persist during strong downtrends without immediate reversal.
Q: Can DeFi activity recover soon?
A: Recovery depends on renewed user interest, new protocol launches, or yield incentives. Until then, low TVL will continue to weigh on SOL demand.
Q: Are institutional ETF filings enough to boost SOL price?
A: Not immediately. While ETF filings from firms like VanEck and Franklin Templeton are positive long-term signals, regulatory delays mean they won’t impact the market in the short term.
Q: What are the next key support levels for SOL?
A: The primary support zones are at $110 and $100. A break below $100 could signal deeper bearish momentum.
Final Thoughts
Solana is navigating one of its most challenging phases since late 2024. With technical indicators pointing to continued downside risk and fundamental metrics showing declining ecosystem activity, near-term sentiment remains bearish.
However, periods of contraction often set the stage for future growth. As selling pressure from token unlocks subsides and institutional developments progress, Solana may regain its footing — particularly if innovation within its DeFi and NFT ecosystems accelerates.
For now, traders should remain cautious, monitor on-chain flows closely, and prepare for increased volatility around the March 1 unlock event.
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