Solana Faces Bearish Sentiment Amid Memecoin Collapse

Traders are increasingly shorting Solana’s native SOL token as market sentiment turns negative due to recent memecoin controversies. Data from Coinalyze shows the long-to-short ratio for SOL futures dropped from 4 to 2.5 on February 17, reflecting rising bearish sentiment.

On Binance’s perpetual futures platform, the short-to-long ratio surged to 4-to-1, as highlighted by crypto influencer Tyler Durden. Perpetual futures, or “perps,” allow traders to speculate without expiration dates. This shift comes as SOL's price declined nearly 6%, according to CoinGecko.

The downturn follows the boom and bust of Solana-based memecoins like Bonk and Dogwifhat, which briefly exceeded $4 billion in market cap before plunging. Additionally, the dramatic collapse of Libra (LIBRA) on February 14 erased $4.4 billion in hours, worsening investor confidence.

Retail traders have also suffered significant losses in Official Trump (TRUMP), a memecoin linked to former U.S. President Donald Trump. TRUMP’s fully diluted valuation has tumbled by 75%, from over $70 billion to $17 billion, with losses across 800,000 wallets totaling nearly $2 billion.

Despite these challenges, Solana's network remains strong. Q4 2024 application revenues surged 213%, primarily fueled by memecoin speculation. Even as memecoin trading cools, Solana continues to outperform Ethereum in revenue generation, according to DefiLlama data. However, the recent turmoil has cast doubt on the sustainability of Solana’s memecoin-driven growth.

As market conditions evolve, traders remain cautious, closely watching whether SOL can regain bullish momentum or if bearish sentiment will persist.