Solana – Why network activity ALONE won’t work for SOL’s price

• Network activity could be the key to SOL’s short-term price action
• Positive demand dynamics may shield it from more downside

Solana has seen robust ecosystem growth so far in 2024, mostly driven by memecoin and DeFi activity. This growth is reflected in the network’s stablecoin marketcap and TVL growth, which have also been quite strong. Can these observations offer insights into what to expect from SOL’s price action?

According to DeFiLlama, Solana’s TVL and stablecoin marketcap metrics have appreciated rapidly so far this year. For some perspective, the TVL was lowest at $1.396 billion towards the start of 2024, while the stablecoin marketcap had a YTD low of $1.83 billion.

Source: DeFiLlama

In our latest assessment, we found that Solana’s stablecoins marketcap was at $3.22 billion while its TVL was at $5.29 billion. This also means that both metrics are now halfway towards their historic highs. That’s not all though.

Solana’s stablecoin marketcap’s latest rally pushed it towards a high just before mid-July, peaking at $$.4 billion on 12 July. Meanwhile, the TVL continued to go up despite a broader decline. This was a sign that liquidity may have been flowing from stablecoins to the DeFi ecosystem.

Why rising TVL could signal more demand for SOL

TVL growth amidst a decline in stablecoin marketcap suggests that holders are more confident in moving their funds into Solana’S DeFi ecosystem. If that is the case, then the demand for DeFi tokens may also fuel demand for SOL. Such an outcome would allow it to be more resilient against the downside.

Is SOL heading for another robust breakout then? SOL slid into overbought territory briefly a few days ago but, our analysis suggests that the bulls might maintain dominance. It is just coming from a correction phase and despite that, it managed to recover close to its current YTD high.

Source: TradingView

The second key observation was that it recently broke above a descending resistance level. A sign of bullish confidence that could be the start of yet another extension to the upside.

Strong demand for SOL from its DeFi ecosystem could support the probability of a bullish breakout.

Solana’s on-chain volume and revenue figures slowed down between March and April. However, data from May to present day suggests that the same metrics have been recovering since.

Source: DeFiLlama

The volume and revenue figures further support the previously mentioned signs of growing network activity.