Since reaching a new all-time high of $264.63 on Nov. 22, Solana (SOL) has encountered increased selling pressure. This caused its price to fall by almost 10% in seven days.
This decline has led to an increase in liquidations of long positions in the futures markets. As bearish sentiment strengthens, traders may face further losses. Here’s why.
Solana’s market activity faces decline
Over the past week, the 8% drop in SOL's price has wiped out $64 million in long positions from its derivatives market.
Solana Long Liquidations. Source: Coinglass
Long liquidations occur when traders who have opened positions in favor of a rising price are forced to sell the asset at a lower price to cover their losses as the price falls. This happens when the asset's price falls beyond a certain level, forcing these traders to exit the market.
This is a bearish sign because as Solana long traders try to avoid further losses on their investments, their selling pressure could increase and contribute to further downward movement in the market. This is reflected in the coin’s open interest, which is currently at a weekly low of $3.34 billion.
Solana Open Interest. Source: Santiment
Open interest refers to the total number of open contracts (futures or options) that have not been settled or closed. When open interest falls during a price decline, traders are closing their positions. This indicates reduced market participation and a lack of conviction in the asset's positive price movement.
SOL Price Prediction: Bears dominate the market
Solana’s Awesome Oscillator confirms the increasing bearish bias against the coin. As the price has been falling over the past week, the indicator has returned red histogram bars.
The Awesome Oscillator identifies an asset's price trends and potential reversal points. Additionally, when it returns red bars, it indicates that the short-term momentum is weaker than the long-term momentum, suggesting a possible downtrend or a decrease in bullish momentum.
If the selling activity gains more momentum, SOL could fall below the crucial support level formed at $231.54. A drop below this price point will send the price to $205.56.
Solana Price Analysis. Source: TradingView
On the other hand, if buying pressure gains momentum, the altcoin will rally towards its all-time high of $264.63.
The article Solana crashes and generates a wave of liquidations: are there reasons to worry? was first seen on BeInCrypto Brasil.
