Investors’ Long Positions on SOL Tokens and Future Concerns
Investors currently hold long positions on SOL tokens, potentially leading to a long squeeze. The open interest in SOL futures is primarily driven by leveraged bullish bets, reaching a record high of $1.7 billion in the past week.
The dollar value of unsettled futures contracts, known as notional open interest, has increased by over $700 million since the start of February, reaching $1.7 billion. An additional $400 million has been added since February 8th, surpassing the previous record set in late December during the meme coin-led rally.
Coinalyze’s data indicates that over 63% of positions are long, translating to over $1 billion in bullish futures bets.
The increase in open interest suggests fresh money entering the market alongside the price rally. However, the use of leverage can amplify gains and losses, introducing instability into the market and potentially causing swift movements in any token’s value.
Due to the current bias towards long positions, investors holding such positions may feel compelled to sell during a bear market to limit losses, leading to a potential liquidation cascade. A similar scenario occurred in late December, peaking at $1.37 billion before a 30% drop.
SOL’s Liquidity Comparison with BTC and ETH
SOL, the native coin of the Solana blockchain, has been a top performer, reaching new highs in late December and hitting $118.48 today.
Kaiko, an on-chain research provider, analyzed SOL’s liquidity index, revealing that it lags behind BTC and ETH. SOL has a lower market depth-to-volume ratio on centralized exchanges, indicating a lower ability to support large market orders without significantly impacting the asset’s price.
Analysts’ Insights on Potential SOL Bullish Breakout
SOL has surpassed the $100 threshold and is currently experiencing bullish momentum. Analysts suggest potential resistance at the recent high price of $125, with further resistance zones in the $130 to $140 range based on previous peak and bottom levels.
If the trend sustains, $160 becomes a crucial point in the long-term outlook, corresponding to Fib 0.618. On the downside, the nearest support level for SOL is currently at $110, with the $100 mark being a key point of interest in a potential retreat.
If the $100 threshold is breached, sellers may push SOL towards the 3-month EMA level at $85. To continue the trend, SOL must gather momentum within the $125 – $130 range, which holds significant importance.
Summary
The value of unsettled futures contracts has increased by over $700 million since February, indicating fresh money entering the market. However, leverage can introduce instability. SOL’s liquidity index lags behind BTC and ETH, and if the $100 threshold is breached, sellers may push SOL towards the 3-month EMA level at $85. To continue the trend, SOL must gather momentum within the $125 – $130 range.
