Is Solana gradually fading? The memecoin crisis threatens the future of blockchain.

Solana is considered one of the most promising blockchains in the recent bull run. Its ability to process thousands of transactions per second along with low transaction fees has made this blockchain a formidable competitor to Ethereum and BNB Chain.

However, the explosion of Solana is not only due to its technological platform but also inflated by the wave of speculation into memecoins and projects lacking transparency. Currently, Solana's revenue has dropped 93% since its peak in January, leading many to question: Is Solana dying, or is this just a necessary correction in its development process?

The Burden of Memecoins and Rug Pulls

The Solana ecosystem quickly became a fertile ground for memecoins, with some projects achieving short-term success but also many getting caught up in notorious rug pulls. Names like TRUMP, MELANIA, and LIBRA once stirred the market, attracting both individual investors and trading bots. However, as these projects collapsed, causing significant losses for traders, the interest also quickly faded.

As a result, transaction volumes and revenue from decentralized applications (dApp) on Solana such as Pump.fun, JitoSOL and JupiterDEX plummeted. According to TokenTerminal, the total token trading volume on Solana dropped from $80 billion in January to just $28 billion in March. In particular, the decline in the number of trading bots — which accounted for 86% of all trades at its peak — further weakened the ecosystem.

Overview chart of SOL | Source: TokenTerminal## Capital outflow and declining confidence

Not only are short-term traders and bots withdrawing, but the actual number of users on Solana is also gradually shrinking. The majority of active wallets hold less than 1 SOL, while there are only about 4,971 wallets that own more than 10,000 SOL. This indicates that the level of actual activity and long-term interest in the network remains limited, making Solana susceptible to short-term speculative events.

The total value of locked assets (TVL) of Solana reached 11 billion USD in January, but has now decreased to 6.96 billion USD, reflecting a trend of capital withdrawal and loss of confidence in the ecosystem. Although the liquidity of stablecoins – especially USDC – remains at a significant level, interest in developing new DeFi protocols seems to have cooled.

An Inevitable Death or an Opportunity to Showcase Strength?

This can be seen as a natural cleansing process, where weak and speculative projects are eliminated, paving the way for more sustainable initiatives. However, the decline in revenue and the wave of migration to other blockchains such as BNB Chain, Base, and Ethereum are concerning signals. Blockchains that can survive through crises often have to adapt, innovate, and strengthen their foundations, but whether Solana has the capability to do so remains a big question mark.

The labeling of SOL as merely a platform for memecoins and low-quality transactions poses a significant risk to its long-term development. If Solana cannot attract projects with real practical value and create a more sustainable ecosystem, its future may be closer to decline than to a strong recovery phase.

Solana is at a crucial crossroads

The decline in revenue, fleeing cash flow, and the trend of withdrawal of trading bots are exposing the vulnerabilities in an ecosystem that has developed too quickly but is based on a shaky foundation of speculative sentiment and inflated expectations. Solana still has the technological potential to reposition itself and maintain its status as an important blockchain. But to achieve this, they must overcome the bias of being merely a "temporary stop" for low-quality projects.

If Solana cannot reshape itself and attract more developers along with real capital, a prospect of a stronger decline may occur, instead of a sustainable growth cycle.

Disclaimer: This article is for informational purposes only and is not investment advice. Investors should do thorough research before making any decisions. We are not responsible for your investment decisions.

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Justin

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