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Friday, May 24, 2024

FTX Plan Impact: Solana 5% Drop, Rapid Rebound Expected

Solana experienced a 5% drop in a single day amid concerns over further sell-offs on the FTX platform, potentially putting $125 million at risk if it were to bounce back as it has done previously.

This decline coincides with a notable 40% decrease in Solana’s open interest (OI) over the past month, dropping to $1.78 billion on May 9, according to CoinGlass data. A significant drop in OI typically indicates trader uncertainty and a lack of confidence in taking positions on the cryptocurrency.

Despite these fluctuations, Solana has demonstrated a tendency to swiftly recover from dips. For instance, in the last 30 days, there have been instances where Solana’s price dipped and then rebounded by 5% within 24 hours.

An example of this was on April 19 when Solana experienced a similar 5% decrease but quickly bounced back to $157 within hours, coinciding with Bitcoin’s halving on April 20.

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If Solana manages to regain its May 7 price of $157 with a 5% increase, it could lead to the liquidation of $125 million in short positions. This highlights the volatility and potential for rapid shifts in the cryptocurrency market.

Just days before Solana dipped on May 7, pseudonymous crypto trader CryptoAce told his 13,400 followers on X that Solana’s price was “inside the resistance box” and accurately predicted that a rejection would lead to a drop toward the $142.50 level.

However, Solana’s most recent fall may be attributed to FTX announcing on the same day that it had adequate funds to repay victims of the exchange’s collapse once it sold off its assets — a large portion of those being Solana.

This comes alongside a drop in the overall cryptocurrency market sentiment, as the Fear and Greed Index score fell by 13 points over the past 24 hours, dipping to a score of 54 on May 9.

However, new findings in the ongoing competition between Solana and Ethereum may have also impacted its price in the short term.

On May 8, Cointelegraph reported on claims that the Solana network could be on track to overtake the Ethereum network in transaction fees, which could be a positive news indicator that Solana needs for a price spike.

On May 7, Solana’s total economic value of $2.8 million was close to Ethereum’s $3.1 million total economic value.

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