The Solana (SOL) network is experiencing a notable decline in on-chain liquidity, reaching levels typically seen only during bearish market periods. With liquidity dropping like this, nearly $500 million in long positions is at risk of liquidation with any further price decline.
🔍 What do the network data say?
The profit-to-loss ratio has remained below 1 since mid-November
➡️ This means that losses are still dominating the market.
Recent analyses suggest that Solana has entered a "Liquidity Reset" phase.
➡️ This phase has historically been associated with the emergence of market bottoms before any major recovery.
🧭 Why is liquidity declining?
Analysts suggest that the reason is due to intertwined factors:
Increase in selling activities resulting from losses
Decline in open interest in futures
Decrease in market maker activity
Liquidity is scattered across multiple trading pools
⏳ If this trend continues, recovery may extend into the coming weeks and possibly until early January.
🟢 Nevertheless… institutions continue to buy!
Notably, Solana's exchange-traded funds (ETFs) continue to attract positive inflows weekly, but…
🔸 The currency did not benefit from the upward wave that supported Bitcoin and some major cryptocurrencies last week.
🔔 Summary:
Solana is undergoing a clear liquidity pressure phase and may face critical tests if demand weakness persists. However, capital inflows from institutions may play a significant role in mitigating the downturn as new bottom levels emerge.
