- Solana’s metrics have become increasingly reliant on memecoins.
- Solana’s vulnerability exposed as top memecoins decline
- New competition in the Mimecoin space poses greater risks.
The Solana blockchain has been the hub for Mimecoin transactions for the past year. Thanks to its low fees and ease of use, Mimecoin traders have flocked to Solana, making it a significant source of network traffic.
However, Solana’s main Mimecoin has recently experienced long-term losses, exposing significant risks to the chain and its over-reliance on the volatile Mimecoin market.
Solana’s Blockchain Shakes as Memecoin Activity Declines
The recent MIME crash has shown just how exposed Solana is to these volatile assets.
On Thursday, August 27, the major Solana mimecoins experienced double-digit price drops. The top three mimecoins, DogWifHat (WIF), BONK, and Popcat, fell by 32.96%, 28.14%, and 27.53%, respectively. This price performance was accompanied by a significant decline in Solana trading activity.
The declining activity is reflected in the decline in total daily fees on the Solana blockchain. On August 26, fees fell to $486,000, the lowest since March 14. Solana’s total fees are now more than 10 times lower than the all-time high of $4.95 million on March 18.
The decline in network fees was accompanied by a decline in network volume, but the effect was less pronounced. Total volume in August was $33.3 billion compared to $56.8 billion in July. This suggests that:
These figures show how much Solana’s network traffic relies on Mimecoin, which institutional investors use to measure the company’s overall performance.
Solana’s Mimecoin Exposure Risk
Solana’s recent struggles highlight the significant risks associated with relying on Mimecoin to drive network activity. First, Solana saw significant institutional outflows following the Mimecoin crash. According to a CoinShares report, Solana lost $39 million in institutional investment in just one week.
Memecoin is inherently a volatile asset, heavily dependent on market hype and speculative trading. This means that any downturn in the Memecoin market, which is bound to happen, will have a significant impact on Solana. Furthermore, Solana is increasingly under pressure due to competition in this market.
One of the reasons for the decline in Mimecoin trading could be the emergence of TRON’s SunPump platform. Like Solana’s Pump.fun, this platform makes it very easy to create Mimecoins and has quickly gained popularity. Total fees are now $303,000, compared to $500,000 on August 26, quickly approaching Solana’s Pump.fun.
Solana’s reliance on memecoins puts it in a difficult position. The inherent volatility and increased competition in the memecoin market could significantly impact the metrics investors look at when evaluating Solana’s performance.
On the other side
- There is no guarantee that SunPump’s rapid rise will be sustainable. Furthermore, TRON’s core user base is in Asia, making potential expansion more difficult.
- Solana has a stronger presence and name recognition in the West, especially among celebrities.
Why this matters
Solana’s recent performance figures highlight the significant impact memecoin has had on the ecosystem. While memecoin’s growth is beneficial during the expansion phase, it also poses new risks for Solana.
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