Why Solana’s price is dropping despite a surge in active addresses

Solana, one of the leading blockchains in the decentralized finance (DeFi) sector, has recently made headlines by surpassing an impressive milestone of 100 million active addresses.

However, despite this surge in activity, Solana’s price has been on a downward trajectory, raising questions about the sustainability of its growth and the underlying factors contributing to this paradox.

A surge in active Solana wallets

According to data from Artemis Terminal, Solana’s active address count has skyrocketed from just 509,000 monthly active addresses at the beginning of 2024 to over 100 million.

This remarkable increase in user engagement highlights the platform’s appeal and the growing interest in its ecosystem.

Yet, a closer look reveals a concerning trend: most of these active wallets are largely empty.

Data from Hello Moon shows that over 86 million users hold zero SOL in their wallets, with an additional 15.5 million users possessing less than 1 SOL.

This raises questions about the legitimacy of Solana’s user base and the authenticity of the reported growth.

Solana price drops despite activity surge

The current price of Solana (SOL) stands at approximately $141.37, down 1.3% over the past 24 hours according to Coinmarketcap.

The price has fluctuated within a range of $141.13 to $145.13, reflecting a broader trend of price decline.

Over the past week, SOL has experienced a 3.1% drop, and in the last month, the price has fallen by 6.2%.

Source: Coingecko

Despite a year-over-year increase of 535.3%, the recent downturn highlights the market’s volatility and the disconnect between active address growth and actual market performance.

One reason for this discrepancy may lie in market sentiment and investor confidence.

While a high number of active addresses typically signals healthy network usage, the overwhelming number of empty wallets can lead to skepticism among investors.

The perception that Solana’s growth is not entirely organic could deter potential buyers, thereby exerting downward pressure on prices.

The role of bots and CEXs

Critics have pointed out that the explosive growth in Solana’s active addresses may be artificially inflated by bot activities and interactions with centralized exchanges (CEX).

According to Cointegraph, Dan Hughes, the founder of Radix DLT, noted that when users send tokens to a CEX, proxy addresses are generated, which can lead to a proliferation of zero-balance accounts.

Such mechanisms may create an illusion of high user engagement while not reflecting genuine economic activity.

Hughes further explained that bots can easily manipulate metrics by washing funds between addresses or conducting numerous small transactions, complicating the picture of Solana’s true usage.

While some argue that bot transactions contribute little economic value, Austin Federa, head of strategy at the Solana Foundation, defends the activity by noting that these transactions, although lower in value, still count as user interactions.

However, this leads to a dilemma: while Solana showcases a vibrant ecosystem, the economic implications of its user base remain questionable.

Standard Chartered analysts predict a 5x SOL surge if Trump wins

Adding to the complexity, market analysts like Geoff Kendrick of Standard Chartered have made bold predictions regarding Solana’s future.

According to a post by CNBC, Kendrick forecasts that if Donald Trump wins the upcoming presidential election, Solana’s price could soar fivefold by the end of 2025, reaching around $715.

He also suggests that under a Trump presidency, regulatory ease could foster blockchain growth, particularly benefiting Solana.

In contrast, if Kamala Harris is elected, Kendrick predicts Bitcoin (BTC) will outperform both Ethereum (ETH) and Solana (SOL), complicating Solana’s path.

Despite the current price drop, Kendrick maintains that Bitcoin is expected to reach $200,000, regardless of the election outcome.

This broader bullish sentiment towards cryptocurrencies may provide a counterbalance to Solana’s current struggles.

The paradox of Solana’s price dropping amid a surge in active addresses reflects a complex interplay of factors.

While the blockchain’s user engagement appears robust, the overwhelming number of inactive wallets raises concerns about the authenticity of this growth.

The influence of bots and CEX interactions further complicates the landscape, leading to skepticism among investors.

As the market awaits clearer signals and regulatory clarity, Solana’s journey will undoubtedly remain one to watch in the evolving world of cryptocurrency.

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