Solana faces intense selling pressure, with prices dropping below $130. The cryptocurrency has declined nearly 55% from its January peak of approximately $295.
The downward trend coincides with Bitcoin's fall from $100,000 to around $83,500. Few digital assets have outperformed Bitcoin in recent weeks.
Solana joins other major cryptocurrencies in double-digit percentage losses over the past trading week. Ethereum, Tron, Cardano and Bitcoin have all experienced significant declines. This market-wide correction has reduced blockchain activity across these networks.
Revenue from smart contract deployments and transfers has decreased on Solana. This trend will likely continue as SOL prices remain far below all-time highs.
The price surge in January followed Donald Trump's meme coin launch. Since reaching that record high, which surpassed 2021 peaks, SOL has steadily declined. The broader cryptocurrency market capitalization has fallen 8.8% to $2.75 trillion, reflecting widespread bearish sentiment.
Meme coin enthusiasm has notably cooled on Solana. Data from Pump.fun shows fewer tokens advancing to Raydium listings. New coin launches have decreased, reducing demand for SOL and adding downward pressure. Established meme coins on Solana have suffered even greater losses.
Amid these challenges, a proposal designated SIMD-0228 offers potential relief. Introduced by Multicoin Capital executives Tushar Jain and Vishal Kankani, the measure aims to reduce Solana's inflation rate over time.
"As Solana matures, stakers increasingly earn SOL through mechanisms like MEV. This income stream reduces the network's historical exclusive reliance on token emissions to attract stake," Jain wrote on social media in January.
Since its 2020 launch, Solana has followed a predetermined inflation schedule. Starting at 8%, the rate decreases 15% annually, targeting a long-term rate of 1.5%. Current inflation sits at 4.7%. Most new SOL rewards validators and stakers, pushing circulating supply to 498 million tokens.
The proposal would link SOL issuance to staking participation. It targets a 50% staking rate. Unlike other major blockchain platforms such as Ethereum, Tron, or BNB Chain, Solana does not directly burn tokens.
If staking exceeds 50%, token issuance would decrease, potentially reaching zero. Conversely, lower staking rates would increase issuance to encourage participation. This mechanism could reduce inflation from 4.7% to below 1%.
The change would benefit long-term holders over validators. Validators now earn from both block rewards and Maximal Extractable Value (MEV), including Jito tips. By limiting future supply, SIMD-0228 could strengthen prices through increased scarcity.
SOL currently faces technical support at $130 and resistance at $175. If prices drop below $130 before the March vote—and before FTX estate liquidates 11.2 million SOL on March 1—the token could fall to $100 in an extended bearish pattern.
Community voting on the inflation proposal begins in early March.
Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or legal advice. Always conduct your own research or consult a professional when dealing with cryptocurrency assets.