Recent analysis from Glassnode, a leading on-chain analytics firm, sheds light on why Solana (SOL) is struggling to keep up with Bitcoin (BTC) and Ethereum (ETH) in the cryptocurrency market. Here’s a breakdown of the factors behind this trend.

Solana’s Declining Performance

At the start of Q4 2024, Solana was outperforming both Bitcoin and Ethereum. However, since December, the dynamics have shifted. According to Glassnode, Bitcoin’s price has surged by 18% in the past month, Ethereum has risen by 28%, while Solana has only seen a 3% increase. This marks a sharp decline for Solana, which was leading the market just weeks ago.

Capital Flows: The Key Factor

The answer to Solana’s recent struggles lies in capital flows. Glassnode used the Realized Cap indicator to assess the total capital entering and leaving these cryptocurrencies.

• What is Realized Cap?
  Realized Cap calculates the total value of a cryptocurrency based on the last transaction price for each token. It measures how much capital investors have collectively put into an asset.

By tracking changes in Realized Cap, analysts can determine whether capital is flowing into or out of a cryptocurrency.

Solana’s Outflows Compared to Bitcoin and Ethereum

Data from Glassnode reveals that Solana has been experiencing slower capital inflows compared to Bitcoin and Ethereum. This means fewer investors are committing funds to Solana, which impacts its growth and market performance.

The Bigger Picture

While Solana continues to face challenges, the cryptocurrency remains a key player in the market. However, its recent underperformance highlights the importance of tracking capital flows and investor sentiment to understand market trends.

As Bitcoin and Ethereum continue to attract more capital, Solana must address these challenges to regain its momentum.

Conclusion

Solana’s recent struggles can be attributed to a slowdown in realized capitalization growth. While it outpaced its competitors earlier this quarter, the current capital flows favor Bitcoin and Ethereum. Whether Solana can reverse this trend remains to be seen.