As Solana activity soars thanks to memecoins, its market cap remains grounded

Over the past several weeks, we’ve noticed a notable surge in activity within the Solana network. The seven-day moving average (7DMA) of daily non-vote transactions reached 46 million, its highest level since January 2022. This marks a near-doubling from its most recent low of 21.9 million transactions in late April 2024.

Non-vote transactions refer to all transactions on the network that are not related to validator voting processes. These can include various activities such as transfers, smart contract interactions, and decentralized application (dApp) usage. This surge in non-vote transactions can be attributed to the booming "memecoin" economy within the Solana ecosystem, with platforms like pump.fun having contributed significantly to this growth.

Despite this rapid increase in transactional activity over the past three months, the market capitalization of SOL stands at $67 billion at the time of writing. This is approximately 20% lower than its value in late April and over 25% off its all-time high at the beginning of April, according to CoinGecko.

This reveals a significant discrepancy between the volume of non-vote transactions on the network and the market capitalization of Solana’s native token, as the latter has not reflected the notable rise in network transactions.

According to its 7DMA, the Solana network boasts 1.45 million active addresses per day, indicating that the average active user conducts over 30 transactions daily. This is a stark yet expected contrast to Ethereum, where the average active address transacts just twice a day.

While this metric does not account for potential spam addresses and bots, the high level of activity is a positive indicator of the Solana network’s overall health and usage.

The disconnect between transaction volume within the network and the market capitalization of SOL raises questions, specifically whether the market is not yet fully appreciating the increased activity on the network or whether the market considers that the influx of transactions might be driven by automated bots or the “memecoin economy” do not necessarily reflect genuine user adoption in terms of utility.

Furthermore, the sustained high levels of activity highlight the improvement in Solana's infrastructure, which continues to process a massive number of transactions smoothly. This is a stark contrast to two years ago, when high levels of activity often overloaded the network, resulting in frequent network outages.

This is an excerpt from The Block's Data & Insights newsletter. Dig into the numbers making up the industry’s most thought-provoking trends.