Overview: SOL vs ETH – Deciphering Key Aspects of the Solana-Ethereum Ratio

Key Points

• Solana (SOL) underperformed Ethereum (ETH) by 25% at the end of January.
• The SOL/ETH ratio is approaching key inflection points, indicating potential capital rotation between the two platforms.

Solana [SOL] experienced a significant drop against Ethereum [ETH] in the final week of January. The altcoin saw a substantial retracement of its gains after the launch of the TRUMP memecoin, falling from $295 to approximately $220.

The SOL/ETH ratio showed that SOL’s decline was more than 25% compared to ETH during the same period. This ratio is used to track SOL’s performance relative to ETH, and it can also indicate potential capital movement between the two smart contract platforms.

SOL/ETH Ratio Approaching Key Inflection Points

During the TRUMP frenzy, SOL outperformed ETH by almost 50% in just two days. However, this surge was short-lived, and SOL soon fell into a slump. Other factors such as fears about Chinese Deepseek AI and overvaluation concerns among U.S tech firms also contributed to a broader market downturn that affected SOL and other cryptocurrencies.

Interestingly, ETH managed to weather the weak market sentiment better than SOL, with SOL underperforming ETH by 25% during the recent market downturn. However, this drop also marked a rejection of the SOL/ETH ratio at the upper channel, which has historically signaled a reversal. The pair has now retreated towards key inflection points at the 50-day EMA (moving average) and the channel lows.

If the channel holds, the pair could rebound at the lower support levels, indicating that SOL might regain ground against ETH in the coming days.

Solana’s Position Against Ethereum

Despite the recent slump, Solana has held its ground against Ethereum in some areas, particularly after surpassing Ethereum in monthly revenue for the first time. In January, Solana generated $119M in revenue, compared to Ethereum’s $107.6M.

However, after Solana’s daily trading DEX volume peaked at $35.9 billion following the launch of TRUMP, the metric fell to $4.5 billion. This 87% drop reflects a significant decrease in demand for SOL, the primary token for gas fees within its DeFi ecosystem. This drop in demand has also impacted SOL’s price. The altcoin might only rebound if trading DEX volumes increase across the board.

The $220 price zone is a key short-term level to watch for SOL. This level has also been acting as the 50-day EMA. If SOL falls below this level, it could potentially drop to $200 or lower.