Solana (SOL) witnessed an increase in long liquidations as its price fell below $180 on April 2nd. According to Coinglass data, SOL long liquidations reached a two-week high of $11 million. Liquidations occur in the derivatives market of a cryptocurrency when a position is forcibly closed due to insufficient funds to maintain it.
Long Liquidations in SOL
Long liquidations happen when a token’s value suddenly drops, forcing investors with open positions betting on a price increase to exit their trades. In comparison, the total of short liquidations reached $3 million on the same day. According to assessments of SOL’s futures market activity, the cryptocurrency has been on a steadily increasing downtrend since the beginning of the month. The open interest of the cryptocurrency’s futures, which measures the total number of unsettled or unclosed futures contracts, has been trending downward since April 1st.
Coinglass data indicates that SOL’s futures open interest, which was at $2.88 billion at the start of April, has dropped by 20% since then. A decline in a token’s open positions like this suggests that market participants are exiting their trading positions without opening new ones. Even though the funding rate on cryptocurrency exchanges remained positive, it has shown a nearly 90% decrease since April 1st and was observed at its lowest level in 60 days at the time of writing. The decrease in SOL’s funding rate is notable as it indicates a reduced demand for long positions.
Long-Term Outlook for SOL
This situation could signal that long-term investors are exiting their positions primarily for profit. The withdrawal of long investors in this manner could mean that the market is experiencing high volatility. It could also be a sign that the bullish momentum is weakening. This typically leads to a decrease in buying pressure and eventually causes a drop in the price of the underlying asset.
The gradual increase in the downtrend in the SOL market coincides with a decline in the cryptocurrency’s social activity. According to Santiment data, SOL’s social dominance and social volume have decreased by 50% and 57%, respectively, over the last two weeks. A decrease in a token’s social activity means it is receiving less interaction on various social media platforms. This can commonly be observed when the bullish trend starts to wane.
