Solana Price Recovers Amidst FTX Fallout and Potential Short Squeeze Uncertainty
Summary:
Solana (SOL) experiences price fluctuations as it recovers from the collapse of FTX. Recent selling pressure and potential short squeezes create uncertainty, but the unlocking schedule and derivative market positioning offer hope for an upside trend. Traders and investors should stay cautious and conduct their own research.
Solana's price has experienced significant fluctuations in recent times. Initially, it suffered a steep decline due to the collapse of FTX, falling to a low of $9.89. However, it has since rebounded, gaining 175% to reach a peak of $27.37 as the ecosystem grew.
More recently, SOL came under selling pressure after the Delaware Bankruptcy Court approved the sale of FTX's digital assets, including 55.75 million SOL worth $1.062 million. Despite the negative sentiment, there are indications that a counter move to the upside could occur, as the unlock schedule of FTX's holdings and derivative market positioning are favorable.
Derivatives traders have entered short orders following the announcement, which could result in a possible price surge. It is worth noting that a significant portion of FTX's SOL tokens are locked until 2027, reducing the immediate selling pressure.
The Solana Foundation provided an update on FTX's holdings, revealing that over 33 million SOL tokens are yet to be unlocked, representing more than 60% of FTX's holdings. Furthermore, the terms of the crypto conversion to fiat by FTX impose a cap on weekly sales, mitigating the impact of the selling pressure.
It is expected that it will take around 10 to 12 weeks for the creditors to fully unload their total SOL holdings, which should help distribute the selling pressure over a longer period. Despite this, the price of SOL may still experience volatility in the coming weeks, especially if the futures market presents opportunities for market makers or high-volume traders.
There is also speculation about the possibility of a short squeeze, with the funding rate for perpetual swap contracts plunging to negative 21.1% per annum. This suggests a crowding of short orders, potentially leading to an increase in SOL's price as short traders are forced to buy back at higher prices to close their positions.
Therefore, while SOL faces resistance from a descending trendline and is currently trading below its 50 and 200-day moving averages, there are factors that indicate the potential for an upward movement in the future. As always, investors and traders are advised to conduct their own research and make informed decisions.
Published At
9/14/2023 7:36:48 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.