Recent on-chain data reveals that Solana’s liquidity has contracted to levels typical of a bear market, endangering millions in leveraged positions. According to Wenny Cai, COO of SynFutures, this Solana liquidation risk is driven by realized losses prompting sell-offs and liquidity fragmentation. Currently, the market is in a precarious position where a price drop of 5.5% could trigger a cascade of forced closures.
Metrics provided by analytics platform Glassnode indicate that the 30-day realized profit-to-loss ratio has been below one since mid-November. This suggests that more losses are being realized than profits, which Altcoin Vector describes as a “full liquidity reset.” If the asset’s price descends to 129 dollars, approximately 500 million dollars in leveraged long positions would face immediate liquidation, exacerbating selling pressure in the short term.
On the other hand, institutional flows show an interesting divergence, as Solana ETFs recently recorded record outflows, with 21Shares’ TSOL product losing nearly 42 million. However, despite this Solana liquidation risk, other funds have accumulated net inflows of 17.72 million dollars this week. This strategic accumulation suggests that, although fear persists, some investors see value in current prices and are betting on the ecosystem’s long-term resilience.
Can the Market Absorb This Impact Without Triggering a Massive Crash?
The current context recalls patterns observed previously, specifically the April setup that preceded bottoming phases in the digital asset market. Analysts at Altcoin Vector note that if history repeats itself, reignition could take four more weeks, lining up with early January. This “reset” is fundamental to clear excess leverage, a painful but necessary process to restore the organic health of the cryptocurrency market.
Ryan Lee, chief analyst at BitGet, argues that if this liquidation cluster is triggered, it could be interpreted as a sign of market healing. Clearing excess leverage would pave the way for new institutional inflows and a stronger, more sustainable rebound in the future. Nevertheless, macroeconomic uncertainty keeps traders on alert, as volatility could violently shake the price in both directions.
Finally, Solana’s immediate fate hangs by a thread between capitulation and structural recovery driven by fundamental adoption. If the price manages to hold and rise 3%, 110 million in short covering would be triggered, which could provide the necessary fuel to reverse the current negative trend. Investors will need to watch the 129 dollar level closely in the coming sessions.
