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The Solana (SOL) blockchain has recently witnessed a divergence in its activity on the network and the number of new addresses joining its network. Despite the impressive growth in the number of new addresses, SOL activity on the network declined in May.
Meanwhile, the price of the asset also reflected its activity on the network, as SOL was in a downtrend last week, down almost 10%.
Network Activity Challenges New Address Metrics
As of this month (May), Solana has shown growth in its user base with 5.4 million new addresses joining the blockchain. This surge represents the largest number of new addresses added since October 2022, hinting at a surge in interest in the Solana blockchain.
The number of new active addresses in the Solana network.|Source: IntotheBlock
Typically, a surge in new addresses is indicative of strong blockchain fundamentals, reflecting growing community acceptance and engagement.
However, while Solana has experienced a surge in new addresses, its online activity has declined over the same period. Data from The Block, a well-known blockchain analytics tool, shows that on-chain activity on the Solana network declined in May, in contrast to the influx of new participants.
Solana activity online.|Source: IntotheBlock
On-chain activity refers to transactions, interactions with smart contracts, and other activities that take place on the blockchain. The decline in network activity raises questions about factors affecting overall participation and usage of the Solana blockchain, and why the increase in activity has not positively impacted its price.
Unique circumstances for SOL
Solana’s situation is unique because of the discrepancy between an increase in the number of addresses and a decrease in the price of SOL. While new addresses often correlate with positive growth rates for cryptocurrencies, the price of SOL has fallen by more than 10% since the beginning of May.
Starting from the month of $21.71, the price of SOL is currently trading at $19.68. Over the past week, the asset has fallen in price by 8.2%. SOL has fallen from a high of $21.38 seen last Monday to below $20 at the time of writing.
The price of Solana (SOL) is moving sideways on the 4-hour chart. Source: SOL/USDT on TradingView.com.
Solana’s market capitalization has also fallen over the past seven days. SOL’s market capitalization fell nearly 10% from a high of $217 billion to a high of $8.4 billion last Monday. Meanwhile, its daily trading volume has risen over the past few days.
From $100 million and $150 million a few days ago to almost $300 million in the last 24 hours. The unique separation between Solana’s new address growth and price action has caught the attention of the cryptocurrency community.
Notably, several factors may be contributing to Solana’s opposite trends. Market dynamics, investor sentiment and external market factors may have contributed to the decline in the price of SOL.
Also, while the surge in new addresses indicates growing interest, it is critical to consider the nature of these addresses. An analysis of new address activity, such as trading or long-term ownership, can provide a better picture of the situation.
Featured image by Shutterstock, chart by TradingView