Solayer (LAYER) faces strong selling pressure after a sharp 45% drop, which wiped out weeks of accumulated appreciation. After recording a 460% increase since February, the token is now trading below $1.70, as traders seek to understand the causes of the collapse.

The altcoin lost about $350 million in market value during the correction. With volatility high and the long/short ratio at 1.45, the market remains divided between bets on recovery and expectations of further declines.

What is behind the decline?

LAYER plummeted about 35% in just 24 hours, dropping from nearly $3.10 to $1.90, as the community tries to understand the causes of the collapse. The decline is noteworthy as it occurs despite the strong fundamentals of Solayer, the first hardware-accelerated blockchain, capable of offloading operations in programmable chips and designed to achieve over 1 million TPS and 100 Gbps of bandwidth.

The project also offers real-world utility through its Solayer Emerald Card, which allows users to spend USDC seamlessly via Visa, with support for Apple Pay and Google Pay. From February 18 to May 5, LAYER rose 460%, becoming one of the best-performing altcoins of the year – until the sudden drop interrupted the momentum.

The current scenario is marked by uncertainty. Some attribute the collapse to the actions of market makers, which could have caused a liquidation cascade. Others raise suspicions about questionable practices by the founders or point to the daily unlocks of 110,600 LAYER tokens as the main selling pressure.

However, these daily unlocks represent only $219,000 in value – insufficient to justify a loss of over $250 million in market value. Even more concerning is the unlock scheduled for May 11: the team will release 26.5 million LAYER, valued at approximately $51 million.

If market sentiment does not recover by then, this increase in supply may intensify selling pressure and even push the price down further.

$3.2 million in long liquidations fuel panic

The long/short ratio of LAYER was at 0.78 in the last 24 hours, with 56.14% of traders positioned in short – reflecting increased bearish sentiment.

Around $3.2 million in long liquidations were triggered, more than double the $1.5 million in short liquidations. This forced selling likely accelerated the drop from $3.10 to $1.90 as liquidation cascades increased pressure.

With the upcoming token unlock, the liquidation of leveraged positions has become a key factor in the decline.

The long/short ratio of 1.45 shows that more traders are betting on LAYER's recovery. However, the lack of depth in the order book still represents a significant concern. In such environments, price volatility may remain high, regardless of whether sentiment turns optimistic again.

Longs increase while LAYER struggles below $1.90

The outlook for the altcoin remains highly uncertain, as its price struggles to stay above $1.90 after a sharp decline.

Traders and investors are still seeking clarity on the cause of the drop, while sentiment remains fragile ahead of the token unlock on May 11.

The long/short ratio of 1.45 indicates a significant shift in the market. Currently, 59.2% of positions are long, while 40.8% bet on short, suggesting greater confidence in recovery.

This growing long bias may suggest that some believe the worst is already over, especially after an aggressive sell-off.

This movement also introduces a new risk: if Solayer does not recover and continues to decline, traders with new long positions may face liquidations. This could generate another wave of forced selling in the market.

Article: Trusted Website

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