The price of SOL has dropped today, and it might face even more losses. User interest in Solana's DeFi ecosystem seems to be fading.

As of January 29, Solana's native token, SOL, is down 3%. It’s trading at $231, which is 23% lower than its all-time high of $294 reached on January 19. Several key factors are contributing to this bearish trend:

  • A marketwide sell-off ahead of the US Federal Reserve's decision on interest rates.
  • A decrease in investor interest in SOL’s decentralized finance (DeFi) ecosystem.
  • Weakening technical indicators suggest deeper losses might be on the horizon, with bears targeting a price of $182 for SOL.

Solana is following the trend of other cryptocurrencies, which have also seen declines in anticipation of the Federal Open Market Committee's (FOMC) decision on interest rates.

Notably:

  • Bitcoin (BTC), the largest cryptocurrency by market cap, is down 0.3% today, trading at $102,397.
  • Ethereum (ETH) has dropped over 1.87% in the last 24 hours, trading just above $3,100.

Other major cryptocurrencies, like BNB from BNB Chain, XRP, and Dogecoin (DOGE), have also experienced significant losses recently. Overall, the total cryptocurrency market cap has decreased by 1% over the last day, now resting at $3.49 trillion as of January 28.

This decline in the crypto market comes as participants await the US Federal Reserve's interest rate decision.

The FOMC, which began meetings on January 28, is expected to announce its decision on interest rates today, January 29. Analysts widely believe that the Federal Reserve will keep the Federal funds rate steady in the range of 4.25% to 4.5%. The chance of rates remaining unchanged at the Fed's January 29 meeting is reported at 99.5%, according to the CME FedWatch tool.

Market watchers are keen to see if Fed Chair Jerome Powell will provide a hawkish or dovish outlook, which could impact prices for riskier assets like Solana.

Today’s drop in SOL’s price follows a decrease in the total value locked (TVL) in its DeFi applications, according to DefiLlama. Solana’s TVL has been on a downward trend since January 19, falling 10% over the past 10 days from $12.9 billion to $11 billion.

Several layer 2 protocols, including Jito and Raydium, have reported 4% drops in TVL over the last week, contributing to the decline in the network's value. This drop in TVL indicates that traders are losing interest, suggesting Solana may struggle to attract new users.

Evidence of Solana's bearish trend is also found in the decline of on-chain activity within its ecosystem, based on data from the Dune dashboard pump.fun.

On January 29, SOL's price drop coincided with a significant fall in network transactions. Daily transactions on the Solana blockchain dropped from an all-time high of 71,738 on January 23 to 59,076 on January 28. This indicates lower network activity and reduced user engagement, leading to decreased revenue from transaction fees.

From a technical perspective, today’s losses in SOL suggest a breakdown of a bullish pattern that was triggered by a broader market downturn. Solana’s price fell below $235 on January 28, crossing under the lower boundary of a bullish flag and turning it into a resistance level. If this resistance holds, SOL could drop toward the flag's starting point at $182, which would represent a potential decline of about 20% from current price levels.

Additionally, the sharp drop in SOL’s daily relative strength index (RSI) from an overbought level of 73 on January 18 to a current value of 50 suggests that market conditions still favor the downside.

Analyst Kwantxbt emphasizes that SOL needs to maintain support at $225 to avoid deeper corrections toward the psychological level of $200.