Solana drops 5% on new FTX plan, quick rebound to wipe $125M shorts
Solana (SOL) dropped 5% in a day amid further FTX sell-off concerns, and current trader positions suggest $125 million is in jeopardy if it were to bounce back as it has in recent times.
The price decline comes alongside a 40% decrease in open interest (OI) of Solana over the last 30 days, down to $1.78 billion on May 9, according to CoinGlass data.
The steep decline in OI typically signals that traders are uncertain about the cryptocurrency, and are not confident in taking positions on the asset’s price.
However, Solana has a recent knack for recovering quickly from its dips, which, as of now could jeopardize over a hundred million dollars in short positions.
Over the past 30 days, Solana has seen periods where its price has both dipped and recovered 5% within the same 24 hours.
On April 19, Solana saw a similar 5% decrease before quickly recovering to $157 within hours, just ahead of the Bitcoin halving on April 20.
Similarly, if Solana’s price moves upward 5% to regain its May 7 price of $157, $125 million in short positions will be liquidated.
Just days before Solana dipped on May 7, pseudonymous crypto trader CryptoAce told his 13,400 followers on X that Solana’s price was “inside the resistance box” and accurately predicted that a rejection would lead to a drop toward the $142.50 level.
However, Solana’s most recent fall may be attributed to FTX announcing on the same day that it had adequate funds to repay victims of the exchange’s collapse once it sells off its assets — with a large portion of those being Solana.
Related: Solana-to-Bitcoin cross-chain bridge aims for Q3 2024 launch
This comes alongside a drop in the overall cryptocurrency market sentiment, as the Fear and Index “Greed” score fell by 13 points over the past 24 hours, reaching a score of 54 on May 9.
Although new findings in the ongoing competition between Solana and Ethereum may have also had an impact on its price in the short-term.
On May 8, Cointelegraph reported on claims that the Solana network could be on track to overtake the Ethereum network in transaction fees, which could be a positive news indicator that Solana needs for a price spike.
On May 7, Solana’s total economic value of $2.8 million was close to Ethereum’s $3.1-million total economic value.
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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
