Solana (SOL), the native token of the high-speed blockchain network, saw a short-lived price increase this week. Despite reaching $188.90 on May 21, SOL has retreated back to $168 as of today, May 28. Analysts offer mixed reasons for the drop, citing competition, network usage concerns, and potential overreaction to a rival’s success.
Solana’s validators recently approved a proposal to eliminate the burning of a portion of transaction fees, raising concerns about inflation. While some believe this incentivizes validators and improves network security, others worry it could push SOL’s annual inflation rate to nearly 10%.
The price drop also coincides with the launch of the first-ever Ethereum ETF in the United States. Some analysts suggest investors shifted focus to Ethereum (ETH) after the long-awaited approval, neglecting Solana’s own strong year-to-date gains.
However, the bigger concern for Solana seems to be lagging network usage. While Ethereum and its layer-2 scaling solutions saw significant growth in decentralized application (DApp) volume this week, Solana only managed a modest 5% increase. Similarly, the number of active users on Solana is declining, with competitor blockchains like BNB Chain and Polygon experiencing user growth of over 25%.
