Solana Declines Despite Positive Flows from Spot ETFs
Despite the positive trends associated with Solana spot ETFs, the cryptocurrency’s value has experienced a significant decline. Currently priced around $117, Solana has fallen by 37.8% since the launch of these funds in October 2023. This decline is surprising given that the ETFs have attracted an impressive $884.4 million in total inflows without recording any weekly outflows.
Impact of ETF Inflows on Solana’s Price
According to Simon Shockey, an analyst at Delphi Digital, the inflows from Solana ETFs indicate some market support. However, he emphasizes that these inflows are not the primary drivers of the token’s market price. Shockey noted, “The ETF wrapper is still small compared to the broader market that ultimately sets clearing prices.” He highlights that current market dynamics, particularly in perpetual contracts, could overwhelm the modest ETF demand.
Market Volatility and Liquidations
- In the past 24 hours, approximately $29.8 million in long positions were liquidated.
- The largest single liquidation amounted to $401,799, according to data from CoinGlass.
- Daily trading volume for SOL stands around $5.3 billion across various platforms, as reported by CoinGecko.
On the crypto perpetuals exchange, Hyperliquid, Solana generated $430 million in trading volume within 24 hours. Despite the ongoing ETF inflows, Shockey explains that these do not directly translate to immediate buying pressure in the spot market.
Concerns Over Supply Side Dynamics
Shockey pointed out that market participants on the supply side remain cautious. This caution stems from the anticipated release of locked Solana tokens from the FTX estate auctions. In 2024, administrators of FTX’s bankruptcy sold around two-thirds of a $2.6 billion stash of Solana, with a cost basis of $64, to institutional investors like Galaxy Trading. Notably, these tokens are on a vesting schedule.
Future Unlocking Timeline
- 20% of the unlocked tokens are set to be released in March 2025.
- The remaining tokens will unlock monthly until 2028.
Though unlock events do not guarantee immediate selling, they create a persistent overhang narrative, potentially limiting price rallies as traders prepare for periodic distribution and hedging opportunities.
In conclusion, while Solana’s ETFs are performing well with significant inflows, the broader market dynamics, particularly liquidations and supply concerns, continue to exert downward pressure on the token’s price.
