Solana’s price continues to struggle under pressure from the growing memecoin market despite showing resilience following its largest-ever token unlock.
Solana (SOL) fell over 45% since the Official Trump (TRUMP) memecoin was launched, from over $261 on Jan. 18 to $143 on March 2, TradingView data shows.
The growing investor appetite for memecoins may be limiting Solana’s price performance, according to Dan Hughes, founder of the decentralized finance platform Radix.
SOL/USDT, 1-day chart. Source: Cointelegraph/TradingView
Memecoins “don’t tend to draw in much external capital flow; instead existing eco-system capital “round-robins” from one meme to the next,” Hughes told Cointelegraph, adding:
“Even in the case of TRUMP, most of the inbound liquidity was outflow from other crypto assets, people selling their crypto portfolio to buy TRUMP in extreme FOMO [fear of missing out].”
“You can see the effect in the market, where for a few days everything was red except TRUMP and Solana, and it was amusingly labeled the liquidity vampire,” he added.
SOL/USDT, 3-month chart. Source: Cointelegraph/TradingView
Memecoins may be attracting a significant share of the newly entering liquidity from Solana. Circle minted over $8.75 billion worth of USDC (USDC) since Jan. 1, according to Lookonchain, yet Solana’s price fell over 24% despite the new liquidity.
Related: Wintermute withdraws $38M SOL from Binance ahead of $2B Solana unlock
Still, Solana’s price managed to recover above $140 despite experiencing a $2-billion token unlock, which released over 11.2 million SOL tokens into circulation on March 1 as the biggest token unlock for Solana.
Industry watchers were concerned about a significant downside move for SOL since a large amount of the unlocked tokens were purchased at $64 per SOL in FTX’s auctions by firms such as Galaxy Digital, Pantera Capital and Figure.
Related: Binance is not ‘dumping’ Solana and other token holdings — Spokesperson
Macro events, rug pulls are limiting institutional crypto investment
External macroeconomic factors and recent security incidents also continue limiting the upside of the crypto market, said Hughes, adding:
“Events on the world stage are having a greater impact than in previous cycles. A much larger ratio of invested capital is institutional, who are much more cautious, having to consider a wider set of markets, factors and variables when making decisions […].”
“Couple that with the exhaustion of continued rug-pulls, hacks, losses, it will take some time for the remaining dust to settle and the mojo to come back,” he said.
Investor sentiment is still recovering from the $1.4 billion Bybit hack, which occurred on Feb. 21, marking the largest hack in crypto history.
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