Important takeouts:
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Sol’s funding rates show cautious sentiment, but historic patterns highlight potential short-term price increases.
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Although network use and reduced competition weigh SOL, financial strategies and foundations remain supportive.
Solana’s native token, Sol (SOL), fell to a two-week low of $213 on Tuesday, reflecting an increase in risk aversion across the cryptocurrency market. The first optimism following Wednesday’s US interest rate cuts quickly dissipated as concerns about the labour market and rising inflationary pressures resurfaced.
Sol’s price fell 12% over 48 hours, causing $112 million in liquidation in leveraged bull positions, according to Coinglass data. This sudden revision made traders question whether the movement was moving forward on a deeper downside or whether it represented an exaggerated fear amid the deterioration of the macroeconomic environment.
Sol Perpetual Futures’ funding rate approached zero on Tuesday, highlighting limited demand for long leveraged positions. In neutral market situations, this indicator usually ranges from 6% to 12%. That is, buyers pay to maintain the exposure. The last major period of overly optimism occurred on August 14th, when funding rates surged to 30% and showed intense bullish leverage.
When Sol briefly touched on $253 on Thursday, the funding rate remains neutral, suggesting traders are hesitant to add more upsides. Still, the lack of leverage demand in the derivatives market does not necessarily imply an overt bearish expectation.
On August 19th, after a 13.5% decline over five days, SOL’s funding rate reversed to a negative. However, the $176 level ultimately proved to be a strong entry point as Sol was promoted to $206 on August 24th. A similar trend has been developed previously. It fell 19% over six days following the negative funding rate on August 4th.
Sol Price Drop coincides with reduced network activity and new competitors
Part of the muted enthusiasm around Sol can be explained by reducing activity in the Solana network. Launched on the BNB chain by YZI Labs (formerly Binance Labs), the platform offers the largest extractable, valueless sales and is openly approved by Binance founder Changpeng Zhao.
Over the past seven days, Solana’s active addresses have decreased by 28%, while network prices have decreased by 15%. In contrast, Ethereum fees rose 28% over the same period, while BNB chains rose 74%. The arrival of competitors such as Hyperliquid is challenging the advantages of Solana, especially as Aster’s documents refer to the development of their own blockchain.
Still, the downside of SOL may be limited as it pursues strategies to build strategic cryptocurrency reserves. The latest move comes from Australia-based Fitell Corp (FTEL). This has issued a $100 million convertible note to support the launch of “Solana Treasury Strategy.” The plan, according to the company, is to generate yields by rolling out a combination of on-chain and derivative strategies.
The broader market situation is also based on emotions. Concerns over rising inflation and weakening the US labor market were highlighted Tuesday by US Federal Reserve Chair Jerome Powell, urging the technology-rich NASDAQ index to drop by 1% that day. Increased risk aversion reduced cryptocurrency market capitalization by $178 billion from Sunday.
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There is no clear indication that salt traders would expect a $200 retest based solely on negative permanent futures funding rates. According to Defillama’s metrics, Solana Network continues to lead transactions and active addresses and active addresses, ranking the second value lock (TVL). These metrics enhance the potential price recovery cases as risk appetite gradually returns.
This article is for general informational purposes and is not intended to be considered legal or investment advice, and should not be done. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or express Cointregraph’s views and opinions.
