Solana declined by 5% in 24 hours following FTX sell-off concerns. However, up to $125 million in short positions are at risk of liquidation if Solana rebounds. 

The price decline follows a 40% decrease in Solana’s open interest (OI) in the last 30 days. CoinGlass data revealed that SOL open interest declined to $1.78 billion on May 9. 

Such a sharp decline in OI often signals a trader’s indecision about investing in a crypto asset. However, Solana has recently been observed to recover swiftly from dips. Such a recovery pattern, when it happens, threatens millions of dollars in short positions. 

Solana Price Dips Raise Concerns for Liquidation 

Historical price data reveals that Solana experienced a similar 5% dip on April 19, But it quickly recovered within a few hours ahead of the April 20 Bitcoin halving. So, if Solana’s price rebounds by 5% to $157, then $125 million in short positions will suffer liquidations. 

A few days ago, pseudonymous trader CryptoAce predicted Solana’s price was inside the resistance box. He accurately predicted that SOL would face rejection at $148 and drop to $142.50.

Solana’s price dip is likely a result of FTX’s announcement that it has realized enough funds to repay its victims of the exchange’s 2022 fallout. FTX proposed to make this repayment after selling off its assets, which include a large portion of Solana. 

FTX sold almost two-thirds of its SOL assets to Galaxy Trading, Pantera Capital, and Neptune Digital Assets. This sale was processed at a 63% discount, leading to a 37% price drop for Solana after the auction. 

FTX still holds an estimated 11-15 million SOL tokens that could be subject to more discount auctions. However, a four-year lock period prevents these tokens from being traded for now, thus preventing a supply shock

Also, a decline in the general crypto market is another evident cause of Solana’s price decline. While a swift Solana price rebound remains uncertain, some analysts are bullish on the asset. 

Crypto analyst Dan Smith believes SOL will surpass Ethereum in transaction fees this month. If this happens, Solana will likely ride on a renewed investor interest, transitioning into a bullish phase. 

How is SOL Faring Today?

Solana Declines 5% Based on New FTX Plan, Quick Recovery Could Liquidate $125 Million Shorts

SOL has formed an inverted hammer on the daily chart, which signals a possible trend reversal. It has found support at $141.2 and is attempting to rally above the $147.3 resistance level.   

The long upper wick on today’s candle suggests that the buyers and sellers are still active. Additionally, the RSI indicator is in the neutral zone with a value of 46.74, confirming traders’ indecision in the market.  

However, the Parabolic SAR is still under the candles, confirming a return of buyers to the market. Therefore, SOL will likely rebound from the $141.2 support level to rally in the coming days. 

The Tech Report - Editorial ProcessOur Editorial Process

The Tech Report editorial policy is centered on providing helpful, accurate content that offers real value to our readers. We only work with experienced writers who have specific knowledge in the topics they cover, including latest developments in technology, online privacy, cryptocurrencies, software, and more. Our editorial policy ensures that each topic is researched and curated by our in-house editors. We maintain rigorous journalistic standards, and every article is 100% written by real authors.

Leave a Reply

Your email address will not be published. Required fields are marked *