Solana DEX Volumes Surpass Ethereum, But Challenges Remain

Solana's decentralized exchange (DEX) volumes have surpassed those of Ethereum, securing the second position in the market. According to data from DefiLlama, Solana's DEX activity reached $64.1 billion over a 30-day period, outpacing Ethereum's $61.4 billion. This surge in activity is largely attributed to key contributors such as Raydium, Pump.fun, and Orca, which accounted for significant volumes. However, despite this growth, overall DEX activity on Solana remains 91% below the levels seen in January.

The rise in DEX volumes has sparked speculation among traders about the potential for Solana's native token, SOL, to reclaim the $180 level. However, the recent decline in SOL's price, which has dropped 15% since failing to reclaim the $168 level on June 12, has dampened some of this optimism. This bearish movement followed a period of reduced network activity and weakening demand for memecoins, which have traditionally been a significant driver of activity on the Solana network.

The appeal of the memecoin sector has continued to fade, with most tokens losing 25% or more in the past 16 days. Tokens such as Giga, Popcat, Fartcoin, PNUT, Bonk, and WIF have all experienced significant declines, further dampening enthusiasm about Solana’s rising DEX market share. This trend has raised concerns among investors about the long-term prospects of the Solana network.

Another concern for SOL investors is the rise of Hyperliquid, which has emerged as the dominant blockchain for perpetual trading. According to DefiLlama, Hyperliquid’s 30-day trading volume was 84% higher than the combined total of its five largest competitors. This shift has reduced interest in both Ethereum layer-2s and standalone decentralized applications (DApps) on Solana and BNB Chain, potentially weakening Solana's position in the market.

The success of Hyperliquid has fueled speculation that other projects may launch their own independent blockchains, potentially including major Solana-based DApps such as Pump.fun. This fear has weakened traders’ conviction that Solana can become the dominant player, as seen in derivatives markets where demand for leveraged long positions in SOL has diminished. In a neutral market, perpetual futures typically show an annualized funding rate of 5% to 12% for long positions. When this rate turns negative, it signals bearish sentiment as shorts are paying to maintain their trades. Over the past 30 days, derivatives data shows no sustained optimism for SOL.

Despite these challenges, Solana's ecosystem has broader use cases beyond memecoins and token launches. Davo, from Drift Protocol, noted that Solana’s robust base layer supports “asset availability,” meaning tokens can be natively used as collateral. He also emphasized the absence of an “offchain matching engine,” which helps protect DEX users from transaction reordering or prioritization. Considering Solana’s low fees and high scalability, a return to the $180 mark could happen even before the ETF decision in October.

The biggest potential catalyst for SOL remains the possible approval of a Solana spot exchange-traded fund (ETF) by the US Securities and Exchange Commission, with a decision expected in October. Until then, bulls are counting on the network’s technical strengths to support price recovery. However, the current market dynamics and the rise of competitors like Hyperliquid present significant challenges that Solana must overcome to regain its momentum.