{"id":401818,"date":"2022-01-31T22:55:00","date_gmt":"2022-01-31T19:55:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/tvl-network-outages-or-derivatives-whats-behind-solanas-sol-60-drop\/"},"modified":"2022-01-31T22:55:00","modified_gmt":"2022-01-31T19:55:00","slug":"tvl-network-outages-or-derivatives-whats-behind-solanas-sol-60-drop","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/tvl-network-outages-or-derivatives-whats-behind-solanas-sol-60-drop\/","title":{"rendered":"# TVL, network outages, or derivatives: What&#8217;s behind Solana&#8217;s (SOL) 60%+ drop?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a35fd9417b70\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a35fd9417b70\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/tvl-network-outages-or-derivatives-whats-behind-solanas-sol-60-drop\/#TVL_and_the_number_of_active_addresses_dropped\" >TVL and the number of active addresses dropped<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/tvl-network-outages-or-derivatives-whats-behind-solanas-sol-60-drop\/#Derivatives_data_could_be_a_consequence_but_not_the_cause\" >Derivatives data could be a consequence, but not the cause<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># TVL, network outages, or derivatives: What&#8217;s behind Solana&#8217;s (SOL) 60%+ drop? <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-128018ef>The past couple of months have not been kind to cryptocurrencies. The sector&#8217;s aggregate market capitalization plunged 50% from a Nov. 10 peak at $2.87 trillion to the current $1.44 trillion. Solana&#8217;s (SOL) downfall has been even more brutal, presently trading at $88 after a 66% correction since its $260 all-time-high.<\/p>\n<p>Pinning the underperformance exclusively to the recent network outages seems too simplistic, and it doesn&#8217;t explain the accelerated decoupling over the past week, so let&#8217;s take a look at what might be going on. <\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-01\/d35347d8-fecd-4ca9-911c-3646fdef380a.png\"><figcaption style=\"text-align: center;\"><em>Solana\/USDT at FTX (blue) vs. Total crypto capitalization (orange). Source: TradingView<\/em><\/figcaption><\/figure>\n<p>The Solana network suffered four incidents in the span of a few months. According to the project&#8217;s developers, a sudden spike in the number of computing transactions caused network congestion, which crippled the network. <\/p>\n<p>Interestingly, the network struggles with congestion since the developers advertise a 50,000 transaction per second (TPS) capacity. The latest incident on Jan. 7 has been attributed to a distributed denial-of-service (DDoS) attack, but data shows us that network attacks are less relevant than D<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">App<\/a>s use. <\/p>\n<p>Cyber Capital chief investment officer Justin Bons <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/Justin_Bons\/status\/1478873392208093184\">criticized<\/a> the network&#8217;s security, mentioning that DDoS can be used to &#8220;temporarily gain proportional-staked control over the network by attacking other stakeholders.&#8221;<\/p>\n<p>Sergey Zhdanov, chief operating officer of crypto exchange EXMO UK, also said DDoS attacks and similar outages &#8220;don&#8217;t really influence the trust of the network&#8221; and should be disregarded. Zhdanov makes a point comparing Ethereum network fees surpassing $50 as a similar hiccup, but not significant enough to cause investors to abandon it for good.<\/p>\n<p>Solana&#8217;s main decentralized application metric started to display weakness earlier in November after the network&#8217;s total value locked (TVL), which measures the amount deposited in its smart contracts, began to linger at $15 billion.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-01\/27dea003-7abc-413d-b93e-dfe35e6d7c4a.png\"><figcaption style=\"text-align: center;\"><em>Solana network Total Value Locked, USD. Source: DefiLlama<\/em><\/figcaption><\/figure>\n<p>Notice how Solana&#8217;s DApp deposits saw a 44% decrease in three months, as the indicator reached its lowest level since Sept. 8. As a comparison, Fantom&#8217;s TVL currently stands at $9.5 billion, a 79% increase in three months. Another DApp scaling solution competitor, Terra (LUNA), saw a 60% TVL hike to $16 billion.<\/p>\n<p>Not even the $10 million raised by Solana&#8217;s decentralized finance (DeFi) application Hubble Protocol in early January was enough to recover investors&#8217; confidence. Crypto heavyweights like Three Arrows, Digital Currency Group, Delphi Digital and Crypto.com Capital backed the launch of the crypto-backed stablecoin and zero-interest borrowing platform.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"TVL_and_the_number_of_active_addresses_dropped\"><\/span>TVL and the number of active addresses dropped <span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Total value locked is no longer the primary metric that reflects strong fundamentals, meaning a 66% price correction has other factors at play than just a reduced TVL. To confirm whether DApps use has effectively decreased, investors should also analyze the number of active addresses within the ecosystem.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-01\/4a46acf8-df67-4bde-a925-5b54cd21ec2b.png\"><figcaption style=\"text-align: center;\"><em>Solana dApps 30-day on-chain data. Source: DappRadar<\/em><\/figcaption><\/figure>\n<p>As shown by DappRadar data on Jan. 28, the number of Solana network addresses interacting with most decentralized applications dropped by 18% to 32%, except for the non-fungible token (NFT) marketplace Magic Eden.<\/p>\n<p>The lesser interest on Solana DApps was also reflected in its futures open interest, which peaked at $2 billion on Nov. 6, but recently faced a steep correction.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-01\/3f42c21e-7bb0-449e-bdc2-014969d5efcc.png\"><figcaption style=\"text-align: center;\"><em>Solana futures aggregate open interest. Source: Coinglass<\/em><\/figcaption><\/figure>\n<p>The above chart shows how derivatives traders&#8217; interest in Solana plunged 75% in less than three months. That is especially concerning because a smaller number of futures contracts might reduce the activity of arbitrage desks and market makers. For example, it is common for participants to self-limit their exposure to 20% of the asset volume or open interest.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Derivatives_data_could_be_a_consequence_but_not_the_cause\"><\/span>Derivatives data could be a consequence, but not the cause<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>It&#8217;s probably impossible to pinpoint the correlation and causation between SOL&#8217;s price drop, the decrease in the network&#8217;s Apps use, and the fading interest from derivatives traders. However, none of those indicators point to a price recovery anytime soon.<\/p>\n<p>The data above suggests that Solana holders should be less concerned about momentary outages and focus on the ecosystem&#8217;s use versus competing chains. As long as the ecosystem remains healthy, investors have no reason to lose trust due to temporary network outages.<\/p>\n<p><em>The views and opinions expressed here are solely those of the <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/noshitcoins\"><em>author<\/em><\/a><em> and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.<\/em><\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/tvl-network-outages-or-derivatives-what-s-behind-solana-s-sol-60-drop\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# TVL, network outages, or derivatives: What&#8217;s behind Solana&#8217;s (SOL) 60%+ drop? &#8221; The past couple of months have not been kind to cryptocurrencies. The sector&#8217;s aggregate market capitalization plunged 50% from a Nov. 10 peak at $2.87 trillion to the current $1.44 trillion. Solana&#8217;s (SOL) downfall has been even more brutal, presently trading at&#8230;<\/p>\n","protected":false},"author":1,"featured_media":401819,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDEvOGEzYWQwMzAtZjE0Yy00Y2JiLWJiNWQtYmQ2YzM4Zjc0MDc0LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74867,74863,74860,78168,74939,75434,92498,73634,73785],"class_list":["post-401818","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-altcoin","tag-cryptocurrencies","tag-cryptocurrency-exchange","tag-dapps","tag-market-analysis","tag-smart-contracts","tag-solana","tag-ddos","tag-markets"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/401818","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=401818"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/401818\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/401819"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=401818"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=401818"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=401818"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}