TVL, network outages, or derivatives: What's behind Solana's (SOL) 60%+ drop?
The past couple of months have not been kind to cryptocurrencies. The sector's aggregate market capitalization plunged 50% from a Nov. 10 peak at $2.87 trillion to the current $1.44 trillion. Solana's (SOL) downfall has been even more brutal, presently trading at $88 after a 66% correction since its $260 all-time-high.
Pinning the underperformance exclusively to the recent network outages seems too simplistic, and it doesn't explain the accelerated decoupling over the past week, so let's take a look at what might be going on.
The Solana network suffered four incidents in the span of a few months. According to the project's developers, a sudden spike in the number of computing transactions caused network congestion, which crippled the network.
Interestingly, the network struggles with congestion since the developers advertise a 50,000 transaction per second (TPS) capacity. The latest incident on Jan. 7 has been attributed to a distributed denial-of-service (DDoS) attack, but data shows us that network attacks are less relevant than DApps use.
Cyber Capital chief investment officer Justin Bons criticized the network's security, mentioning that DDoS can be used to "temporarily gain proportional-staked control over the network by attacking other stakeholders."
Sergey Zhdanov, chief operating officer of crypto exchange EXMO UK, also said DDoS attacks and similar outages "don't really influence the trust of the network" and should be disregarded. Zhdanov makes a point comparing Ethereum network fees surpassing $50 as a similar hiccup, but not significant enough to cause investors to abandon it for good.
Solana's main decentralized application metric started to display weakness earlier in November after the network's total value
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