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Solana TVL and over 50% price drop from ATH, but gaming DApps could turn things around

Solana TVL and over 50% price drop from ATH, but gaming DApps could turn things around

2022 has not been a good start for cryptocurrencies and to date the total market capitalization has fallen by 21% to $1.77 trillion. Solana’s (SOL) correction was even more brutal, presenting a correction of 48.5% since the beginning of the year.

Solana (blue) against Ether (orange), AVAX (purple), BNB (yellow). Source: Trading View

Solana tops the staking charts with $35 billion in value locked, which equates to 74% of SOL tokens in circulation. Several reasons can be identified for the underperformance, including four network outages in late 2021 and early 2022.

The latest incident on Jan. 7 was attributed to a Distributed Denial of Service (DDoS) attack, forcing Solana Lab developers to update code and therefore reject these types of requests.

However, investors are more concerned about the centralization caused by the costs of being a Solana validator. To achieve block times of 400 milliseconds, the recommended material features a 12-core 2.8 GHz processor, 256 GB of memory, 1 TB high-speed solid-state drives, and low-latency internet connection.

dApp usage is down

Solana’s leading decentralized application metric began showing weakness earlier in November after the network’s Total Value Locked (TVL) began to linger at $15 billion.

Solana network total locked value, USD. Source: DéfiLlama

The chart above shows how Solana’s Decentralized Application (DApp) repositories have fallen 50% in three months, with the indicator hitting its lowest level since September 8. For comparison, Fantom’s TVL currently stands at $9.5 billion after doubling in three months. Another DApp scaling solution competitor, Terra (LUNA), saw an 87% increase in TVL to $23.2 billion.

On the bright side, on February 21, FTX.US, the US arm of global crypto derivative and cash exchange FTX, announced a new blockchain gaming unit. It should also be noted that Solana Ventures partnered with FTX and Lightspeed Venture on November 5 to launch a $100 million fund dedicated to the sector.

To confirm whether this drop in TVL should be of concern, it is worth analyzing DApp usage metrics. Some DApps are not financially intensive, so the deposited value is irrelevant.

Solana dApps 30-day on-chain data. Source: DappRadar

As data from DappRadar shows, on January 28, the number of Solana network addresses interacting with decentralized applications dropped by an average of 18%. The only positive change was Solend, an algorithmic lending protocol.

The dwindling interest in Solana DApps was also reflected in its futures open interest, which peaked at $2 billion on Nov. 6 and was recently hit by a sharp correction.

The gaming sector could be a surprise factor

Even though Solana has been the hardest hit compared to similar smart contract platforms, there is solid network utilization in non-fungible token (NFT) markets, as measured by Magic Eden’s 178,820 active addresses. in the last 30 days.

Additionally, Solana Ventures’ bet on the gaming sector could further showcase the network’s processing capacity. For example, games account for half of the top 10 DApps in each blockchain covered by DappRadar. This includes Splinterlands, which has 578,280 active addresses, and Alien Worlds, which has 544,900.

The data above suggests that Solana is losing ground to competing chains, but holders are not worried as 74% of coins are still stuck in staking. As long as Solana Labs’ partnerships and investments continue to show potential, there is no reason to be bearish on SOL.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.