Solana Traders Brace for Potential Sell Pressure on SOL: An Unfiltered Analysis

Solana (SOL) has long been associated with Sam Bankman Fried, the founder of now-insolvent crypto exchange FTX and hedge fund Alameda Research. As an early investor in the project, Bankman Fried’s collapse in 2022 led to a significant drop in SOL’s price, along with other “Sam coins.” However, since the start of 2023, SOL’s price has seen a recovery, gaining 175% and reaching a peak of $27.37.

Recently, SOL has faced selling pressure after the Delaware Bankruptcy Court approved the sale of FTX’s digital assets, including 55.75 million SOL worth $1.062 million. However, despite the selling pressure, it is important to note that the majority of FTX’s SOL stake is vested from 2025 to 2027, limiting the impact of the sale.

Derivatives traders have piled on with short orders after the announcement, which could lead to a counter move to the upside. It is worth mentioning that the Solana Foundation released an update on FTX’s Solana holdings, revealing that a portion of the SOL tokens held by the defunct exchange are locked until 2027. This means that more than 33 million SOL tokens are yet to be unlocked, representing over 60% of FTX’s holdings.

The selling pressure on SOL will be distributed over several weeks as per the terms of the crypto conversion to fiat by FTX. Additionally, the price of SOL may exhibit volatility on both sides, especially in the futures market. MartyParty, a crypto trader, believes that the selling pressure is overblown and that Solana will not be significantly impacted.

There is also the possibility of a short squeeze for SOL. The funding rate for perpetual swap contracts on crypto exchanges has plunged to negative 21.1% per annum, indicating a crowding of short orders. The open interest volumes for SOL have increased, and funding rate data shows a bearish inclination. This opens up the potential for a short squeeze, where short traders are forced to buy back their positions at higher prices.

Technically, SOL is facing resistance from a descending trendline and is trading below its 50 and 200-day moving averages, which could act as resistance levels.

In conclusion, while SOL is currently facing selling pressure due to the sale of FTX’s digital assets, the majority of FTX’s SOL stake is locked until 2025-2028. This, combined with the potential for a short squeeze, suggests that a counter move to the upside could happen instead.

Disclaimer: 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.

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J-S Tremblay
About the author - J-S Tremblay

I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...

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