Solana’s 520% Surge Raises Concerns for Bullish Investors

Solana’s Soaring Performance in Daily Chart

Solana (SOL) has been experiencing a significant surge in its performance, as seen in the daily chart. Currently, the coin is trading above $50, marking a remarkable 520% increase in the past year. This surge comes after the coin slipped below $8 following the collapse of FTX, a now-defunct crypto exchange, and Alameda Research, a trading wing linked with FTX and one of the leading crypto market makers.

Solana Blistering Rally At The Back Of Dropping Liquidity?

Despite Solana’s “blistering” performance and reaching new 2023 highs, concerns have been raised about the disparity in liquidity in USD and “native unit” terms by Kaiko, a crypto analytics platform. The “native unit” refers to the base unit of account of any currency, in this case, SOL. Native units are crucial for measuring market depth as they provide easier access for gauging the relative liquidity of the coin without the need to convert it to other denominations, like USD or BTC, for example.

According to Kaiko, at a 1% market depth, Solana’s liquidity in USD terms is at the highest level since the collapse of FTX. However, when looking at SOL’s liquidity in “native units,” it is struggling and at the lowest point since the FTX collapse.

SOL Still Reeling From FTX Collapse, What Happens Next?

The collapse of FTX had a significant impact not only on SOL and its native tokens but also on the broader crypto markets. Following the bankruptcy of the Sam Bankman Fried exchange in November 2022, SOL prices plummeted, and fear of contagion across the board also affected Bitcoin (BTC) prices, failing at its perceived role as a safe haven.

By November 2022, Bitcoin had flash crashed below $16,000, with Solana dropping from highs of $220 to as low as $8. This contraction also saw crypto’s liquidity, which was more adverse in Solana.

Despite the general optimism across Solana communities, it is apparent that liquidity in SOL’s native units is yet to recover and might require more time. According to Kaiko, market makers are opting to maintain stable liquidity for SOL even with soaring prices in USD terms.

Presently, SOL prices are steady above $50 but maintain an uptrend versus the USD. However, there are indications of a possible cooling off of the upside momentum, with a series of lower lows in lower time frames. Technical analysts are closely watching the $38 mark, which represents November 2022 highs, as a vital reaction point.

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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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