Solana Sees Declining User-Activity As Memecoin Rug-Pulls Erode Trust

Authored by Zoltan Vardai via CoinTelegraph.com,

Rug pulls and insider schemes involving Solana-based memecoins are driving investor outflows and a decline in capital inflows, as confidence in the sector deteriorates.

The rate of monthly capital inflow into Solana and Solana’s MEME index turned to a monthly negative of -5.9%, according to a Glassnode chart shared with Cointelegraph.

Market: top asset realized cap percent change, 30-days. Source: Glassnode

This decline marks a significant drop from December 2024’s peak, largely due to reduced memecoin investment, according to CryptoVizArt, a senior analyst at Glassnode.

The analyst told Cointelegraph:

“The rate of monthly capital inflow into Solana has declined from December 2024 high to 2.5% per month, mostly due to the negative capital flow in MEME sector. However, Solana still has some positive momentum but it’s declining faster than Bitcoin.”

BTC, ETH, SOL, 1-month chart. Source: Cointelegraph

Solana’s price fell over 29% during the past month, while Ether’s price fell over 15% and Bitcoin fell 7%, Cointelegraph Markets Pro data shows.

Solana user activity is also in decline. The number of active addresses on the network fell to a weekly average of 9.5 million in February, down nearly 40% from the 15.6 million active addresses in November 2024.

This marks a significant cooldown for the blockchain, according to Glassnode’s analyst, who added:

“A significant cool down in Solana activity is evident, however, we are relatively higher than pre pre-bull market baseline of

Solana active addresses. Source: Glassnode

The decline in investor activity has been linked to disappointment in recent Solana-based memecoin launches, particularly the Libra token, which was endorsed by Argentine President Javier Milei. The project’s insiders allegedly siphoned over $107 million worth of liquidity in a rug pull, triggering a 94% price collapse within hours and wiping out $4 billion in investor capital.

Solana capital, user exodus may be net positive for the network

As confidence in Solana weakens, millions of dollars worth of crypto is being transferred from Solana to other blockchains, signaling a potential capital exodus that may turn into a net positive for the blockchain’s long-term growth.

Over $7.7 million worth of funds were transferred from Solana to Arbitrum and over $6.9 million to Ethereum, Debridge data shows.

Total transferred amount between chains on deBridge. Source: Debridge 

Solana’s advanced technology has attracted its fair share of bad actors and cases of insider corruption, despite the technology being neutral in itself. However, these issues may turn into a net positive for Solana’s growth in the long term, according to a Feb. 18 X post from blockchain researcher Aylo:

“This washout will end up being a very good thing long term. Standards need to go up. Bad actors need to be removed.”

“If the SOL price and other L1 token prices are solely held up by gambling activity then the space will stay quite small and the larger valuations won’t be justified,” he added.