Solana's native token, SOL, has plummeted to its lowest point in 45 days, currently trading around $136, raising concerns about whether it can bounce back from the $130 mark. Despite a temporary rally reaching $151 on June 16, SOL has undergone a significant 24% correction since June 7, markedly underperforming the broader cryptocurrency market, which saw a 14% decline in the same period. This suggests that Solana's struggles are more severe than the general market downturn.

Several factors contribute to Solana's bearish outlook, notably the network's on-chain activity and a noticeable lack of interest from derivatives traders. If this trend continues, SOL may retest the $130 support level or potentially fall further.

A portion of the waning interest in cryptocurrencies can be attributed to the strong performance of traditional stock markets. The S&P 500 index, driven by tech stocks, hit an all-time high on June 17. Positive employment and consumer data have bolstered investor confidence, leading to expectations that the U.S. Federal Reserve might start cutting interest rates by September.

Despite the high growth potential of the cryptocurrency market, many investors are wary of the sustainability of the U.S. economic growth, particularly with high interest rates looming. This caution impacts altcoins like SOL more severely, as institutional investors have preferential access to Bitcoin and Ether through exchange-traded funds (ETFs).

Even with a possible market rally in the future, Solana faces stiff competition from other smart contract-focused blockchains. The network hosts numerous applications that bridge assets to competing blockchains, which offer higher yields, more airdrops, greater liquidity, and frequent token launches.

Solana's staking rewards are another point of concern. The native staking reward rate is only 1.3% above the SOL token inflation rate, in contrast to Ethereum's more attractive 2.8% effective reward rate, thanks to its burn mechanism which results in a minimal 0.4% annualized inflation. This disparity affects Solana’s total value locked (TVL), which has stagnated below $30 million since May.

Adding to the skepticism, BitMEX co-founder Arthur Hayes has predicted that Solana will not remain a leading decentralized application (DApp) network within the next one to three years. He suggests Aptos could emerge as the frontrunner, though he has not provided detailed reasoning for this assertion. Aptos employs a modular approach to transaction processing, grouping transactions into batches executed using a sharded architecture.

Increased competition from Ethereum’s layer-2 solutions also pressures Solana. Layer-2 blockchains like Arbitrum, Base, and Optimism boast a higher TVL and more active DApps compared to Solana. Solana's $589 million weekly volume pales in comparison to BNB Chain's $4.9 billion and Arbitrum's $9.5 billion. In terms of decentralized finance TVL, Solana stands at $1.2 billion, surpassing Aptos and Avalanche but falling significantly behind BNB Chain's $4.9 billion.

Traders should monitor derivatives markets to gauge market sentiment. The funding rate for SOL perpetual futures has remained below 0.01% every eight hours over the past week, reflecting a neutral market. The last surge in leverage cost occurred on June 6, when rates spiked to 0.5% per week.

Given the current metrics of Solana's network activity, DApp deposits, volumes, and the tepid interest from SOL derivatives traders, the likelihood of SOL breaking below the $130 support level remains high in the near term.