Key takeaways:
SOL (SOL), the native cryptocurrency of Solana, faced a strong rejection at the $158 level on Monday. The subsequent drop to $143 by Wednesday marked a 14% loss over seven days. Traders now worry that the chances of reclaiming the $200 level have diminished, as demand for leveraged SOL positions surged amid the recent price weakness.
As of Wednesday, open interest on SOL futures reached 45.7 million SOL, a 19% increase from the previous month. While every long (buyer) is matched with a short (seller), the intensity of leverage on each side can differ. Those outstanding positions are now valued at $6.7 billion, making it crucial to assess which side has been more aggressive.
Will SOL ETF approval odds lead to price benefits?
Funding rates on perpetual futures serve as a key metric for understanding market sentiment. In neutral conditions, the annualized funding rate should fall between 5% and 15%, indicating that long positions are paying a premium to keep trades open. When markets turn bearish, this rate tends to drop below that range.
On Wednesday, SOL’s funding rate fell to 0%, suggesting a growing appetite for bearish positions. More importantly, this indicator has failed to stay above the 15% annualized threshold over the past three months, reflecting a broader lack of confidence among bulls. Even the rally to $185 in mid-May failed to trigger renewed interest in leveraged longs.
While leveraged longs are not strictly required for SOL to reclaim the $200 mark, a significant change in investor perception is critical. In the absence of renewed confidence, the market may continue to face selling pressure. SOL’s performance remains closely tied to network activity on Solana, which has stagnated over the past three months following a record high in January.
The total value locked (TVL) on the Solana network has remained steady at nearly $10 billion, while weekly revenue from decentralized applications (DApps) has dropped below $40 million. For comparison, these DApps generated more than $100 million per week between mid-November and mid-February.
SOL’s recent decline also reflects the overhyped excitement fueled by memecoin activity, particularly following the launch of the Official Trump (TRUMP) token on Solana. This caught traders off guard, as previous efforts by companies aligned with United States President Donald Trump had largely favored Ethereum.
Related: Altcoin ETF applications surge as SEC softens crypto stance
The potential approval of a SOL spot exchange-traded fund (ETF) by the US Securities and Exchange Commission is seen as the most significant short-term catalyst for the token. Still, analysts argue that SOL stands to benefit even more from the long-term growth of tokenized securities on the Solana blockchain, according to a Cantor Fitzgerald equities research report.
The analysts reportedly assert that Solana is “meaningfully better than Ethereum across every metric,” and expect an increasing number of companies to adopt SOL as a treasury asset. They point to strong developer growth and greater operational efficiency compared to Ethereum’s more complex layer-2 ecosystem.
While the $200 SOL price target may appear out of reach based on derivatives data, growing institutional interest and blockchain adoption could swiftly reverse current market sentiment.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
