The rising popularity of meme coins on the Solana network has triggered a major liquidity drain from other layer one (L1) chains, downplaying the headwinds caused by outages.
The Solana (SOL) network, a leading layer one (L1) blockchain housing a thriving meme coin and Web3 environment, has gained more popularity ahead of Donald Trump’s second inauguration as the 47th US President. The large-cap altcoin, with a fully diluted valuation of about $158 billion at the time of this writing, registered the highest gains, last week, among the top ten altcoins.
According to the latest market data, the Solana token rallied over 41% last week to trade at about $267 on Monday, January 20, during the mid-London session. The well-funded altcoin registered a 45% surge in its 24-hour average trading volume to hover about $36 billion.
Consequently, Solana entered price discovery after hitting a new all-time of about $293 on Sunday.
Solana Network Faces Delays
The unprecedented adoption of the Solana network has resulted in several difficulties, especially in the past two years. Despite the Solana network upgrade in 2024, through version 1.17.20, several Solana DeFi protocols, led by Phantom Wallet, experienced delays due to a huge influx of new users.
The Phantom wallet processed $1.25 billion in swapped assets from 10 million transactions in the past 24 hours. Although the Solana network has been processing an average of 258K transactions per minute, the Phantom wallet alone experienced a massive surge of more than 8 million transaction requests per minute.
Consequently, some SOL users experienced huge fee hikes, up over 120% in the past 24 hours, in addition to slow processing speeds.
“We truly apologize for the issues today. Everyone’s patience is appreciated as we make sure to make the necessary improvements to better handle scale,” the Phantom wallet noted.
The massive flow of FOMO traders has resulted in a huge congestion.
Market Outlook
The Solana network is expected to experience further growth in the coming years, especially fueled by the change in crypto policies under Donald Trump’s administration. For the first time since the network launch, its total value locked (TVL) has surged to an all-time high of about $11.64 billion.
The strategic adoption of the Solana network by Donald Trump will foster meteoric growth in the coming years. Moreover, the launch of the TRUMP TRUMP $6.08 24h volatility: 2.8% Market cap: $1.22 B Vol. 24h: $229.22 M meme coin, which had a fully diluted valuation of about $55 billion, has attracted nearly 1 million on-chain holders in just 48 hours.
Additionally, the MELANIA MELANIA $0.13 24h volatility: 2.5% Market cap: $111.59 M Vol. 24h: $5.28 M meme coin, which had a pooled USDC liquidity of more than $233 million, has attracted over 442k on-chain holders.
In the long haul, the Solana network must scale its throughput to more than the 65k TPS by Visa Inc (NYSE: V) in order to compete with Ethereum (ETH) in the DeFi sector. Additionally, Solana’s layer two scaling solutions must develop at a faster rate to accommodate the exponential adoption through its memecoin ecosystem.
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