Why is Solana (SOL) price down today?

Solana is one of the most underperforming cryptocurrencies in the last 24 hours, falling by 6.80% to reach $180.80 on Feb. 17 against the broader crypto market’s losses of 1.72%.Key catalysts behind SOL’s price decline today include:Solana’s association with back-to-back rug pull scams.Sustained declines in Solana’s transactions and decentralized exchange volumes.A prevailing bearish reversal pattern nearing its breakdown stage. Solana mentioned in high-profile rug-pull scamsSOL’s underperformance today could be due to macro factors like profit-taking. However, the growing concerns over onchain manipulation on the Solana network is another pressing issue.A recent Bubblemaps investigation reveals:The team behind Libra (LIBRA), a rug-pull scam linked with Argentine President Javier Milei, is the same as that behind Melania (MELANIA), a memecoin promoted by US First Lady Melania Trump.A Solana wallet labeled "0xcEA" played a key role in both launches.Millions of profits were generated through manipulative tactics.Funds were obscured through multiple Solana wallets before being moved crosschain.The 0xcEA wallet is also linked to other high-profile "pump and dump" token launches, including a fake Robinhood (HOOD) token.Negative headlines surrounding the network could accelerate SOL’s losses.Memecoin frenzy is backfiringAnalyst Benjamin Cowen highlights Solana’s underperformance against top crypto Bitcoin after the launch of Pump.fun, a memecoin launchpad, in January 2024.Key points:Pump.fun made it easier and cheaper to launch memecoins on Solana, leading to an explosion of low-quality, speculative tokens.Many Pump.fun tokens have been scams or rug-pulls, reinforcing concerns that pump-and-dump schemes dominate Solana's ecosystem.If Pump.fun had attracted mostly speculative traders, many might have cashed out profits, leaving SOL’s price vulnerable to corrections.Solana is also weakening against its rival, Ether (ETH), with SOL/ETH pair falling over 28% since its Feb. 3 peak and 5% in the last 24 hours.Less Solana onchain activity dampens SOL demandSolana’s bearishness is also evidenced by declines in onchain activity within the Solana ecosystem, according to the data provided by Dune dashboard Pump.fun. What to know:A sharp drop in the number of network transactions preceded SOL’s price drop on Feb. 17.The amount of daily transactions on the Solana blockchain has dropped from an all-time high of 71,738 on Jan. 23 to 9,303 as of Feb. 17.Additionally, SOL volumes across Solana’s decentralized exchanges are down a lot.The chart below shows a sharp drop in Solana DEX trading volume after peaking in December 2024.This indicates suppressed network activity and less overall user interaction with the platform, hurting SOL demand.Solana’s funding rates go negativeSolana's Open Interest (OI) is increasing, but funding rates are negative, which provides crucial insight into why SOL’s price is falling.Things to know:As SOL's price dropped, Solana’s OI in the futures market increased from $5.31 billion to $5.88 billion daily. OI measures the total number of outstanding futures contracts, and an increase suggests more traders are entering positions.A rise in OI alongside a price drop indicates that new short positions (bets against SOL) are being opened.Meanwhile, SOL’s weekly funding rates dropped to -0.27% on Feb. 17 compared to 0.071% a day ago.Negative funding means shorts are paying longs to keep their positions open.This suggests that more traders are aggressively shorting SOL, anticipating further downside.Solana could drop another 40%Solana’s price drop appears to be part of its prevailing head-and-shoulders (H&S) pattern.Note that: An H&S pattern consists of three peaks: a higher central peak (head) flanked by two lower peaks (shoulders), with a common support level (neckline). The target price is estimated by measuring the distance from the head’s peak to the neckline and subtracting it from the neckline’s breakdown level.As of Feb. 17, SOL is potentially forming the pattern’s right shoulder, eyeing declines toward the neckline support at around $180.50.A decisive breakdown below $180.50 increases the risks of Solana price dropping toward the H&S target of around $110, down by over 40% from current prices. However, if SOL holds above the neckline, a potential recovery toward the local high of $215 could follow, invalidating the H&S outlook.This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.