Is a significant sell pressure on SOL looming? This question has been circulating in the crypto space following the collapse of FTX, a once-thriving crypto exchange. This connection between FTX and Solana (SOL) traces back to Sam Bankman Fried, the founder of the now-defunct FTX and hedge fund Alameda Research. Bankman Fried was an early supporter of Solana and heavily invested in several projects within the Solana ecosystem during the 2020-2021 bull run.
Deciphering the FTX-Solana Connection
Following the demise of FTX in late 2022, SOL and other cryptocurrencies closely associated with Bankman Fried, often referred to as “Sam coins,” suffered a significant blow. SOL’s value plummeted to a low of $9.89, marking a staggering 96.3% drop from its peak of $259.96. However, since the onset of 2023, SOL has managed to recover, gaining 175% to reach a peak of $27.37, with the ecosystem also witnessing growth.
Despite this, the recent Delaware Bankruptcy Court’s approval of the sale of FTX’s digital assets, which includes 55.75 million SOL worth $1.062 million, has exerted tremendous selling pressure on SOL. Yet, factors such as the unlock schedule of FTX’s holdings and derivative market positioning suggest that an upward counter move could be on the horizon.
Assessing the Sell Pressure on SOL
Post the court ruling, SOL’s price dipped to a weekly low of $17.96, only to gain around 4% the following day, with longs worth $800,000 liquidated since then, as per CoinGlass data. Crypto trader MartyParty posits that the sell pressure on SOL might be overstated as most of FTX’s SOL stake is vested from 2025 to 2027.
It’s crucial to note that derivatives traders have piled on with short orders following the announcement, which could trigger a counter move to the upside. The Solana Foundation’s update on FTX’s Solana holdings post-collapse reveals that a significant portion of SOL tokens held by the bankrupt exchange is locked until 2027. According to this schedule, over 33 million SOL tokens are yet to be unlocked, representing more than 60% of FTX’s holdings set to be sold in the market.
The Potential for a SOL Short Squeeze
Coinglass data indicates that the funding rate for perpetual swap contracts on crypto exchanges plummeted to negative 21.1% per annum on Sept. 13, suggesting a surge in short orders. The open interest volumes for SOL have risen from $266 million to $327 million over the week, with funding rate data showing that traders have maintained a bearish inclination, opening up the possibility of a short squeeze.
Technically, SOL faces resistance from the descending trendline since July and is trading below its 50 and 200 day moving averages at $21.08 and $22.09, which could potentially act as resistance levels.
While the market remains unpredictable, tools like cryptoview.io can provide valuable insights and analytics to help navigate the volatile crypto space. With comprehensive data at your fingertips, making informed decisions becomes less daunting.
Please note that this article does not constitute investment advice or recommendations. Investing and trading involve risk, and it’s crucial to conduct thorough research before making any decision.
