Solana plunges amid $4.4B memecoin scandal

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Solana (CRYPTO:SOL) is experiencing bearish pressure, with its price declining nearly 17% from recent highs, driven by memecoin scandals and decreasing trading volumes.

The network is grappling with the fallout from controversies surrounding memecoins like LIBRA (CRYPTO:LIBRA), Pumpfun, and Meteora, eroding investor confidence and impacting its total value locked (TVL).

The LIBRA meme coin, endorsed by Argentina’s President Javier Milei, experienced a surge to a $4.5 billion market capitalisation before collapsing.  

This event has led to legal challenges for Milei, who faces fraud charges for promoting the token.  

According to the Associated Press, lawyers in Argentina have accused Milei of endorsing a "rug pull" scam, where developers inflate the token's value before abandoning the project and taking the funds.  

"Within this illicit association, the crime of fraud was committed, in which the President’s actions were essential," stated lawyer Jonatan Baldiviezo.  

Bubblemaps identified connections between the creator of LIBRA and the MELANIA (CRYPTO:MELANIA) token, noting that the wallet associated with the LIBRA creator extracted $87 million from the meme token.  

The Solana meme coin category experienced a 5% drop in market capitalisation, hovering above $11 million.  

The rise of memecoins on Solana had previously boosted the network, with application revenues increasing by 213% in the fourth quarter of 2024.  

However, insider selling and significant losses for retail investors are now souring sentiment.  

"The amount of shit thats coming up to the surface now is really badly damaging to SOL ecosystem," said pseudonymous trader Runner XBT.  

As memecoin scandals intensify, short positions on SOL are increasing.  

The ratio of long to short SOL positions on cryptocurrency futures exchanges dropped from 4 to 2.5, indicating a market-wide tilt toward bearishness.  

On Binance’s perpetual futures trading platform, the ratio of short to long positions has risen to 4-to-1.

At the time of reporting, the Solana (SOL) price was $178.00.