Outflows from Solana investment products recently set a new record. Investors withdrew more than $39 mln, which was the largest weekly outflow in history. Why is this happening?
Several key reasons for the massive capital outflow from Solana investment products can be identified as follows:
1. A decrease in trading volumes of meme coins
According to Dune, total meme coin transaction flows across all blockchains, including Solana, are down 86% from their peak in March.
Solana relies heavily on meme coin trading, so the fall of this segment hit the Solana ecosystem hard.
This, in turn, points to a decrease in the interest or confidence of traders in this segment, which was reflected in the price of the SOL token.
2. Overall correction of the cryptocurrency market
After a 20% rebound from August 5 lows, the cryptocurrency market corrected, and total capitalization dropped to $2.07 trln.
This overall market decline probably also affected Solana's investment products.
3. Macroeconomic factors
CoinShares attributed the drop in trading volumes to “the latest macroeconomic data, which implied that the Fed is less likely to cut interest rates by 50 bps in September".
Expectations surrounding the Fed's tightening cycle could lead to outflows from risk assets such as cryptocurrencies.
Thus, a combination of the decline in popularity of meme coins (the main driver of Solana), a broad-based correction in the cryptocurrency market and expectations of a rate hike by the Fed led to record outflows from Solana investment products.