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According to the derivatives market, SOL has reached a short-term maximum

2 min read

 

SOL is at maximum
Source: Shutterstock.com/Shizume

SOL reached ATH of $ 216 on September 9 after gaining 508% since August. Bullish trend caused some analysts to predict a $ 500 target, which would mean a market capitalization of $ 150 billion.

It is worth noting that during SOL’s growth, ETH’s average transaction fee exceeded $ 40. Growing interest in the NFT market accelerated the transition of investors to Solana, which was strengthened by the launch of the NFT market on FTX on 6 September.

Prices SOL, AVAX, ATOM on Binance.  Source: TradingView

 

Prices SOL, AVAX, ATOM on Binance. Source: TradingView

The above graph shows the bimonthly performance of SOL compared to Avalanche (AVAX) and Cosmos (ATOM). Both fight for the same decentralized application user base and offer faster and cheaper transactions compared to Ethereum (ETH).

Has the shortfall in the SOL price been delayed?

It is strange that on 14 September there was an outage in the Solana network that lasted more than 12 hours. The team explained that a large increase in transaction load to 400,000 per second flooded the network.

Solan's open interest.  Source: Bybt.com

 

Solana’s open interest. Source: Bybt.com

Despite the recent failure futures markets Solana record open interest to $ 1 billion. This is an increase of 640% in two months. Thanks to this number, the Solana derivatives market is the third largest after BTC and ETH. These data confirm the interest of investors, but they cannot be considered bullish, because futures longs and shorts are always balanced.

Derivatives markets are moving towards a balanced situation

It is necessary to answer this question analyze funding rate. Perpetual contracts, also known as inverse swaps, have an embedded rate that is usually charged every eight hours. This fee ensures that there is no imbalance in exchange risk.

The positive level of funding suggests that longs are demanding more leverage. However, the opposite situation occurs when shorts require additional leverage. This will cause the funding rate to become negative.

Solana - the funding rate of perpetual 8-hour futures.  Source: Bybt.com

 

Solana – the funding rate of perpetual 8-hour futures. Source: Bybt.com

As mentioned above, the eight-hour fee peaked at 0.12% on 5 September, corresponding to 2.5% per week. In addition, SOL faced September 7 extreme volatility. After peaking at $ 195, the SOL price collapsed by 35% within 9 hours and liquidated speculative positions. This has led to the current balance between longs and shorts.

The data do not show that investors would be in a hurry to add long positions with leverage despite the current open interest of $ 1 billion. In addition, given the gain of 410% in the last two months, traders have reason to fear another negative prediction. BTC has also failed to break the $ 50,000 psychological barrier, and it has not yet been confirmed whether the recent decline below $ 40,000 was a day.

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All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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