What’s Next as FTX Sell-Off Concerns Lead to a 5% Drop and $125M Short Liquidation?
Key Points:
– Solana, a prominent cryptocurrency, experienced a 5% decline due to concerns surrounding FTX’s sell-off plans, but quickly rebounded, potentially liquidating $125 million in short positions.
– Solana’s open interest (OI) dropped by 40% to $1.78 billion, indicating market uncertainty and a reluctance among traders to establish positions.
– Reports suggest Solana could surpass Ethereum in transaction fees, which has influenced its short-term price movements and is seen as a positive indicator for its price prospects.
– Despite a slight 2.5% decrease in the past 24 hours, Solana’s market capitalization has surged to $64 billion.
Solana, one of the leading cryptocurrencies, faced a significant 5% decline attributed to concerns about FTX’s plans to sell off assets. However, this downturn was quickly followed by a rebound, raising the possibility of liquidating around $125 million in short positions.
In the last 30 days, Solana’s open interest (OI) has decreased by 40% to $1.78 billion as of May 9, according to CoinGlass data. This decline in OI often indicates market uncertainty and a hesitation among traders to establish positions on the cryptocurrency.
Despite recent market turbulence, Solana has shown a tendency to swiftly recover from price declines, posing a threat to existing short positions. Within 24 hours after facing price declines, Solana has repeatedly rebounded by 5% over the past month.
For example, on April 19, Solana experienced a similar 5% drop before quickly rebounding to $157, just before 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.
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. As Solana comprises a significant portion of these assets, the announcement likely had a pronounced impact on investor sentiment.
Additionally, broader market sentiment has declined, with the Fear and Greed Index dropping by 13 points in the past 24 hours to a score of 55 on May 9.
Recent reports suggest that Solana has the potential to surpass Ethereum in transaction fees. This possibility of challenging Ethereum’s dominance is seen as a positive indicator for Solana’s price prospects in the short term.
Currently, Solana is priced at $143.81, reflecting a slight 2.5% decrease in the past 24 hours. Despite this dip, Solana’s market capitalization has surged to $64 billion.