SOL is struggling to reclaim $145, but the fundamentals of the Solana network remain solid.

The native token of the Solana network, SOL (SOL), has not surpassed $145 since July 3. This underperformance can be partly explained by the declining investor interest in cryptocurrencies, which has caused the sector’s total market cap to drop by 5% over the nine-day period. Despite this, SOL underperformed its competitors between July 3 and July 12, falling by 7.8%, while BNB (BNB) and Ether (ETH) fell by 6.5% over the same period.

Traders are now concerned that SOL’s bearish momentum will continue, even as the broader crypto markets recover some of their losses. However, Solana’s on-chain metrics and SOL’s derivatives indicate that a reversal may be in progress, paving the way for a bullish rally above $160, last seen five weeks ago.

Solana TVL goes head-to-head with the secondary BNB chain

Some Solana SPL tokens have been underperforming significantly, which may explain the decline in demand for SOL. When Solana ecosystem participants lose money, less money is circulating in decentralized applications, which in turn negatively affects demand for SOL. Some notable events between July 3 and July 12 include DogWifHat (WIF) dropping 24%, Helium (HNT) dropping 18%, and Jito (JTO) dropping 18%.

Overall, SOL is the fourth largest cryptocurrency excluding stablecoins, boasting a market cap of $65 billion. To put things in perspective, its competitors Toncoin (TON) has $18.4 billion, Tron (TRX) has $12 billion, and Avalanche (AVAX) has $10.1 billion. Furthermore, Solana’s total locked value (TVL) first matched the BNB chain on July 5, and the gap has been minimal since then.

According to DefiLlama data, BNB Chain will be more than double Solana’s TVL by the end of 2023. The $2 billion gap in favor of BNB Chain has now closed, meaning traders are deploying significantly more capital on the Solana network. Highlights from Solana include liquid staking Jito, which has $1.6 billion in deposits, followed by Marinade with $1.1 billion and Kamino with a TVL approaching $1.1 billion.

Tron comes in second in terms of TVL with $7.6 billion, but 72% of that comes from a single decentralized finance (DeFi) application, JustLend. Analysts have strong concerns, given that 94% of deposits come from wrapped versions of Bitcoin that have no solid proof of reserves. In essence, Solana is competing directly with BNB Chain for second place in deposits.

Solana network activity has increased in terms of both user count and volume.

Solana is by no means a leader in terms of decentralized application (DApp) activity, but its metrics have improved over the past seven days while most of its competitors have declined.

According to the data, Ethereum, BNB Chain, and Polygon have seen a decline in active users, while Solana has seen a 19% increase in the past seven days. Similarly, Solana DApps trading volume reached $703 million during the same period, a 12% increase over the previous seven days. Meanwhile, market leader Ethereum has seen a 37% decrease in trading volume.

Related: Cryptocurrency Trading Volume to Surpass $108 Trillion by 2024, Europe Leads

Solana’s decentralized exchange Radium has amassed an impressive 1.71 million active addresses in just seven days, a 39% increase. In comparison, MoveStake, the leading DApp on the BNB chain, had 198,570 active addresses in the same period.

Finally, we need to analyze the futures market for SOL. Perpetual contracts are also called reverse swaps and incorporate a built-in ratio that is recalculated every 8 hours. Basically, a negative ratio indicates that the shorts (sellers) are using higher leverage.

In particular, SOL’s 8-hour funding rate turned negative between July 5 and July 6, but this indicator is now close to 0, indicating balanced demand between longs (buyers) and shorts (seller). It remains to be seen what could restore confidence among SOL investors and push the price back to $160, but on-chain and derivatives indicators show no signs of stress.