"Short Sellers Swarm"...Solana Rejected at $98, Fears of Heading to $78

▲ Solana (SOL)

Solana (SOL) is facing growing market anxiety after being pushed back from the $98 resistance level and undergoing a 15% correction. The perpetual futures funding rate turned negative, increasing demand for bearish positions. This, coupled with a slowdown in decentralized exchange activity and the rise of competing chains, quickly cooled short-term investor sentiment for Solana.

According to Cointelegraph on May 19 (local time), Solana fell by 15% after being rejected at $98 on the 11th. On Tuesday, it retested the $83 range, after which the futures funding rate turned negative. This was interpreted as a sign of increased demand for Solana short positions.

The annualized funding rate for Solana perpetual futures recorded -3% on Tuesday, a significant drop from +8% on Saturday. In a neutral market environment, this indicator tends to hover around +9%, reflecting the cost of capital and exchange risk. However, after Solana fell below $90 on Saturday, bullish leverage demand significantly weakened.

A slowdown in decentralized exchange activity within the Solana ecosystem also intensified downward price pressure. The weekly trading volume on Solana-based decentralized exchanges is currently around $11 billion, a significant decrease compared to the January average of $25 billion. Solana decentralized application revenue has also decreased from a January average of $35 million to approximately $20 million per week. Based on the last 30 days, the top Solana-based decentralized application revenue platforms were Pump.fun, Axiom Pro, Phantom, and Jupiter, collectively accounting for 65% of the market share.

Pressure from competing chains has also increased. Cointelegraph identified Hyperliquid and Base as competing networks posing a direct threat to Solana. Hyperliquid has grown its presence in the perpetual contracts market, while Base has leveraged its connectivity with the Coinbase ecosystem. However, Solana still maintained its position as the number one blockchain in terms of decentralized application revenue.

In terms of Total Value Locked (TVL), Solana recorded $5.9 billion, ranking second after Ethereum. BNB Chain followed with $5.5 billion, and Base with $4.5 billion. Decentralized exchanges and staking applications such as Jupiter, Kamino, Sanctum, and Raydium accounted for a major portion of Solana's TVL. Ethereum recorded a TVL of $43.2 billion.

Questions were also raised about some trading activities within the Solana network. X (formerly Twitter) user lukecannon727 analyzed that 1,600 addresses accounted for approximately 63% of the trading volume on PreStocks, a synthetic asset trading platform based on the Solana network. These addresses reportedly showed balanced trading activity, high execution frequency, and small net losses. Cointelegraph stated that while these characteristics are highly consistent with arbitrage activity, they could also suggest volume manipulation.

Cointelegraph analyzed that Solana's price weakness was partly due to decreased demand for decentralized applications and increased competition from Hyperliquid and Base. However, while a rebound in decentralized exchange activity, particularly centered around memecoin trading, is considered a key variable for a future bull market, there is no clear signal that Solana needs to retest the $78 range, which was last seen in early April.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. This content should be interpreted for informational purposes only.*