Solana (SOL) in August: What to Expect?

Introduction

Solana (SOL) cemented its status as a resilient large-cap altcoin, capitalizing on July's broad market rally. Riding the wave of Bitcoin's upward momentum, $SOL impressively broke the $200 barrier, reaching a cycle high of $206.19 on July 22. This price surge catalyzed a significant spike in on-chain activity across the Solana ecosystem, boosting its DeFi Total Value Locked (TVL), DEX trading volumes, and overall network revenue.

However, as the calendar turns to August, signs of exhaustion are emerging. $SOL has since retraced below the $190 threshold, encountering selling pressure that suggests traders may be taking profits after a successful month.

Key Takeaways

• Driven by a market-wide rally and heightened on-chain activity, Solana’s price peaked at $206 in July.

• Key network metrics followed the price action, with Solana's DeFi TVL increasing by 14% and its DEX trading volumes rising by 30% during July.

• As August commences, slowing user demand and declining on-chain activity point to a potential correction. $SOL is currently approaching a critical technical support level at $178.

SOL’s July Rally Ignites Network Growth

Between July 1 and July 22, $SOL experienced a sustained rally, increasing its market value by 40%. As the price climbed, it had a direct and positive impact on the network's on-chain metrics. The value of assets locked in Solana's lending protocols and liquidity pools swelled, driving the network's TVL higher. At the time of writing, Solana’s TVL stands at $9.85 billion, representing a 14% increase over the last month.

This rising demand for $SOL naturally translated into more vibrant trading activity. Volumes on Solana-based Decentralized Exchanges (DEXes) have jumped by 30% over the past 30 days, with over $82 billion in trades recorded in July alone.

This flurry of activity subsequently boosted network revenue. According to data from DefiLlama, the Solana network generated $4.3 million in revenue since the start of July, a 13% increase from the $3.81 million recorded in June.

Momentum Fades as Ecosystem Activity Cools

Despite the strong performance in July, momentum appears to be waning as we enter August. With $SOL's price dipping to the $180 range, signs of weakening demand are becoming evident across the network.

A key indicator is the daily active address count on Solana, which has fallen significantly. According to Artemis, the number of daily active addresses has declined by 16% over the past week. A drop in active addresses typically signals reduced user engagement, translating to a slowdown in transactions, dApp usage, and overall demand for the network’s services. This 16% decline suggests that user participation is cooling, hinting at a potential slowdown in network growth for the month ahead.

In line with this trend, Solana’s DeFi TVL has also started to pull back, falling by 8% over the past week.

This indicates that users are either withdrawing assets from DeFi protocols on the network or the value of those assets is declining with the market's movement.

Bears Eye Critical Breakdown Point for Solana

The recent price decline has pushed $SOL dangerously close to its 20-day exponential moving average (EMA), a critical dynamic support level currently at $178.25. At press time, $SOL is trading at $180.51.

The 20-day EMA tracks an asset's average price over the last 20 days, with greater weight given to recent price action. A decisive break below this crucial support level, especially if accompanied by falling trade volume and declining network activity, could open the door for a deeper correction. In such a bearish scenario, $SOL's price could find its next support near $171.78.

Conversely, this bearish outlook would be invalidated if broader market sentiment improves. In a bullish reversal, the coin's price could rally towards the $186.40 resistance. A successful breach of this level could give $SOL the momentum needed to challenge the $190.47 mark once again.

Conclusion

Solana's performance in July was a textbook example of price action driving ecosystem fundamentals, leading to impressive growth in TVL, DEX volume, and network revenue. However, the bullish momentum that defined July appears to be giving way to caution in early August. Key on-chain metrics like daily active users and TVL are now in decline, mirroring the recent price correction.

For the immediate future, all eyes are on the critical $178 support level, defined by the 20-day EMA. Whether $SOL holds this line and stages a recovery or breaks below it to seek lower support will likely set the tone for the rest of the month. Investors and traders should monitor on-chain data alongside this key technical level to gauge market direction and sentiment.

Frequently Asked Questions

What is causing Solana's price to decline in early August?

The price decline is attributed to several factors, including general market consolidation, investors taking profits after July's gains, and a noticeable slowdown in on-chain activity, such as a 16% drop in daily active addresses and an 8% decrease in Total Value Locked (TVL) over the last week.

What is Total Value Locked (TVL) and why does it matter?

TVL represents the total value of all crypto assets locked or staked in a decentralized finance (DeFi) protocol or across a whole blockchain. It is a key metric used to gauge the health and user trust in a DeFi ecosystem. A rising TVL suggests growing adoption and capital inflow, while a falling TVL can indicate the opposite.

What is the most important support level to watch for $SOL?

According to the technical analysis, the most critical support level for $SOL is its 20-day Exponential Moving Average (EMA), which currently sits at approximately $178.25. A sustained drop below this level could signal further downside.

Is Solana expected to go up or down in August?

The outlook is currently mixed. A bearish scenario could see $SOL fall towards $171.78 if it breaks below the $178 support. However, a bullish reversal, potentially driven by positive market sentiment, could see the price rally back towards $186.40 and even $190. The outcome will likely depend on whether the network can regain its user activity and on broader cryptocurrency market trends.