FTX Sell-Off Fears Trigger 5%Drop, Liquidating $125M Shorts? What’s Next?
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Solana, one of the prominent cryptocurrencies in the market, faced a significant 5% decline attributed to concerns surrounding FTX’s sell-off plans. However, this downturn was swiftly followed by a rebound, raising the possibility of liquidating approximately $125 million in short positions.
Solana’s Decline in Open Interest
According to CoinGlass data, Solana’s SOL witnessed a 40% decrease in open interest (OI) over the last 30 days, plummeting to $1.78 billion on May 9. This decline in OI often signifies market uncertainty and a reluctance among traders to establish positions on the cryptocurrency.
Despite recent market turbulence, Solana has demonstrated a tendency to swiftly recover from dips, posing a threat to existing short positions. Over the past month, Solana has repeatedly rebounded by 5% within 24 hours after facing price declines.
For instance, on April 19, Solana saw a similar 5% drop before promptly rebounding to $157, just ahead of the Bitcoin halving on April 20. If Solana’s price were to climb back by 5% to its May 7 level of $157, it could trigger the liquidation of $125 million worth of short positions, adding volatility to the market.
Factors Behind Price Decline
However, the recent drop in Solana’s price can be attributed to FTX’s announcement of plans to sell off assets to compensate victims of its collapse. Given that Solana comprises a significant portion of these assets, the announcement likely had a pronounced impact on investor sentiment.
Furthermore, broader market sentiment has experienced a decline, with the Fear and Greed Index plummeting by 13 points over the past 24 hours, reaching a score of 55 on May 9.
Solana To Surpass Ethereum
Recent reports suggesting that Solana could potentially surpass Ethereum in transaction fees have also influenced its short-term price movements. The potential for the Solana network to challenge Ethereum’s dominance in transaction fees is viewed as a positive indicator for Solana’s price prospects moving forward.
As of now, Solana is priced at $143.81, reflecting a slight 2.5% decrease over the past 24 hours. Despite this dip, Solana’s market capitalization has surged to $64 billion.
