Solana (SOL) traders seem to believe that the recent decline is just a short-term setback rather than a prolonged downtrend. This is reflected in Solana's long positions since the overall market has witnessed a large-scale liquidation, with values reaching billions of dollars.
But do the indicators agree with this assessment? Below is a detailed analysis of the price fluctuations of SOL.
Solana traders trust in the recovery
According to Coinglass, the Long/Short ratio of Solana is currently at 1.14. As the name suggests, the Long/Short ratio is a measure reflecting the expectations of traders in the market. When this ratio is below 1, it indicates that there are more short positions than long positions in the market.
Conversely, a ratio above 1 indicates that the number of long positions exceeds that of short positions. To clarify, 'Long' refers to traders expecting the price to rise, while 'Short' refers to those predicting a price decline.
Therefore, the current ratio indicates that Solana's long positions are dominating the market. Thus, the average market sentiment is optimistic, and if validated, this could yield profits for traders. Interestingly, this occurs just as the market witnesses the largest number of liquidations in recent days.
Solana Long/Short Ratio | Source: Coinglass
In the past 24 hours, SOL liquidations have reached around $60 million. Of this, long positions account for over $57 million, while the remainder consists of short positions. Liquidations occur when a trader's margin is insufficient, forcing the exchange to close the position to prevent larger losses.
This liquidation event was triggered by the price of Solana dropping below the $215 mark, leading to a series of margin calls and forced position closures.
Solana Liquidation Amount | Source: Coinglass
SOL Price Prediction: A good time for recovery
On the daily chart, the price of SOL has bounced from the support area of $205, formed by the horizontal support zone and the support line of a short-term descending parallel channel.
The bounce has created 2 candles with long wicks below, a sign of buying pressure.
SOL/USDT Daily Chart | Source: TradingView
Therefore, the price of SOL could recover to the resistance line of the channel at $234 in the short term.
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