Key Points:
SOL has rebounded to over $200, but weak on-chain activity and increased competition limit the potential for a sustainable rebound.
Traders show less bearish sentiment, but stagnation in network growth and market share shifts restrict SOL's upside potential.
Solana's native token SOL (SOL) rose back above $200 on Tuesday, recovering from the low of $167 caused by Friday's flash crash. A record $1.73 billion in long liquidations had a profound impact on the SOL derivatives market. This has led traders to question whether bullish momentum has faded and whether SOL can realistically reach $300 within this cycle.
Demand for leveraged long positions remains sluggish, as perpetual futures funding rates hover around 0%. Under normal market conditions, this metric typically ranges between 6% and 12%, indicating that bulls (buyers) are willing to pay to maintain their exposure. Notably, the funding rate for SOL was around 4% before Friday's crash, already below the neutral range.
When funding rates turn negative, it usually indicates that bears (sellers) are in control, although this situation rarely lasts long due to the costs of maintaining these bets. Nevertheless, the ongoing pressure in the SOL derivatives market may reflect broader damage caused by Friday's liquidations across the entire cryptocurrency industry.
On-chain metrics for Solana show that despite SOL trading at 31% below its all-time high of $295 set in January this year, the market still lacks bullish momentum. Since the meme coin craze of 2025, network activity has consistently failed to regain growth, and Solana's leading position in the decentralized exchange (DEX) space has been eroded as new competitors capture market share.
Decentralized applications (DApps) on Solana generate $35.9 million in revenue weekly, while network fees total $6.5 million, down 35% from last month. This slowdown weakens demand for SOL as a payment token for blockchain computing. The decrease in activity has also reduced staking yields for SOL holders, further increasing downward pressure.
In contrast, competing networks like BNB Chain, Ethereum, and Hyperliquid have seen significant increases in transaction fees, with most of the growth coming from the loss of Solana's market share. BNB Chain's weekly transaction fees reach as high as $59.1 million, highlighting the success of the meme coin issuance platform four.meme, which is deeply integrated with the Binance wallet and seen as a direct competitor to Solana's Pump.fun.
Even assuming BNB Chain's strong performance is only temporary, transaction fees in the Ethereum ecosystem have also surged significantly. Layer 2 scaling networks like Base, Arbitrum, and Polygon have seen weekly transaction fees grow by over 40%. Uniswap's transaction fees hit a record high of $83.8 million this week, primarily driven by active trading on Ethereum and Base. Meanwhile, Hyperliquid also benefited from market volatility on Friday, with a significant increase in trading fees.
The ratio of bullish (buy) to bearish (sell) options can be analyzed to determine whether SOL traders are turning bearish.
The ratio of SOL put options to call options on Deribit has remained below 90% over the past week, indicating weak demand for neutral or bearish positions. Historically, this metric rises above 180% when traders anticipate a pullback—this was last reached after SOL's price experienced an 11-day 26.7% increase on September 20.
While SOL's derivatives metrics may be distorted due to Friday's flash crash volatility, the ongoing weakness in on-chain activity is concerning as competitive blockchains gain momentum. The rise of Aster, Hyperliquid, and Uniswap directly impacts Solana's upside potential.
Even if traders do not explicitly turn bearish on SOL, a single event (such as the potential approval of a spot Solana exchange-traded fund in the U.S.) is unlikely to be sufficient to push its price to $300 in the short term.
Related: Economists say that if history repeats itself, Bitcoin (BTC) could rebound by up to 21% within 7 days after a decline.
Original article: “Solana Traders' Favorite Metric Flashes, But Is $300 SOL By December Possible?”
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