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The stability of Solana‘s derivatives products and network shows that investors and users are not ready to give up.
Solana dropped to a four-week low on June 11, testing the $145 support level. In four days, SOL experienced a sharp decline of 15.8%, outperforming the 10% decline in total market capitalization. However, macroeconomic instability may have created a buying opportunity for SOL, based on two key indicators.
Effect of Macroeconomic Events on SOL Price
Investors are worried that the stock market may correct itself due to mixed economic signals and that the US Federal Reserve (Fed) may postpone interest rate cuts. The CME FedWatch tool shows traders increasing the odds of interest rates staying the same through September from 39% to 48%. After the S&P 500 index reached a record high on June 7, investors are awaiting Fed Chairman Jerome Powell’s speech on June 12.
Stuart Kaiser, Citigroup’s head of U.S. equity trading strategy, said a rise in the Consumer Price Index (CPI) of more than 0.4% from the previous month could trigger a broad market selloff, with the S&P 500 falling 1.5% to 2%. 5 states that it may fall. Kaiser also stated that the S&P 500 could experience its biggest single-day move since March 2023. US inflation data is awaited with great attention ahead of the Fed’s interest rate decision.
SOL Investors’ ETF Hopes
SOL investors are hopeful about the possibility of an exchange-traded fund (ETF) listing in the US. Regulators have not yet supported cryptocurrencies other than Bitcoin and Ethereum. Brian Kelly, founder and CEO of BKCM Digital Asset Fund, sees SOL as a strong ETF candidate after Bitwise chief investment officer Matt Hougan noted that Solana’s real-world applications could attract institutional investments.
SOL’s recent poor performance can also be attributed to some issues in the network, particularly those related to maximum extractable value (MEV). Validators on the Solana network were discovered to be profiting at the expense of retail investors by manipulating prices. Solana Foundation has discouraged such harmful actions by removing these validators from its delegation program.
Solana On-Chain and Derivative Measurements Give Positive Signals
Notably, demand for leverage in SOL futures was unaffected by worsening market conditions. Perpetual futures contain an embedded ratio that, when positive, indicates increased leverage demand for long positions. A negative funding ratio indicates the need for more leverage for short positions.
Data shows that SOL’s funding rate has held steady at 0.01% over eight hours since June 8, accounting for around 0.2% per week. Despite the 15% decline in the SOL price, the stability of these rates is an indicator of market resilience. If the bulls were overleveraged, there would be a significant increase in the funding rate, but that is not the case right now.
Chain data on the Solana network shows an increase in the number of users and transaction volume. While some analysts think Solana’s low fees may encourage data manipulation, this is not unique to Solana and also affects competing platforms such as Ethereum’s layer-2 solutions and BNB Chain.
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