Recent developments indicate that interest in Solana remains less vibrant compared to the other two 'giants', but the balance seems to be starting to shift.
In the past week, SOL has experienced extreme volatility: the price strongly rebounded above the 200 USD mark, reaching a peak of 209 USD on Thursday, then quickly plummeted over 20%, falling back to 187 USD in just two days.
Market data indicates that this unusual volatility is closely related to derivative activity, which has unexpectedly come back to life. Notably, the trading volume of perpetual futures for Solana in the past 24 hours even surpassed that of Ethereum.
This is particularly noteworthy as previously, Solana's derivative market was quite subdued, often overshadowed by Ethereum – which has always been the focal point for investors. The strong rise of derivative products related to Solana not only reflects a new wave of interest from the market but may also signal that a 'liquidity rotation' is occurring in the context of the booming altcoin season. A series of other signals further reinforce this view.
DEX trading volume on Solana exploded, reflecting network activity.
In the first week of August, liquidity on Solana's DEX platforms was quite subdued, with the highest level just above 4 billion USD on August 1 and the lowest around 2 billion USD. However, by Thursday, the picture completely changed as trading volume unexpectedly exploded, hitting 7 billion USD.
Data from LunarCrush shows that Solana also registered a slight advancement in market share. SOL's dominance ratio increased from 2.37% on Tuesday to 2.69% on Thursday, coinciding with a wave of active trading across both DEX and derivative markets. However, shortly after, the dominance level decreased slightly, reflecting the instability of capital flows.
This trend parallels the price movements over the week. SOL maintained an upward momentum since the beginning of August, but most of the breakout occurred only in the last two days, when the price surged 19% from the low on Tuesday to the weekly peak on Thursday. Notably, right after the acceleration, SOL faced a deep correction due to excessively hot derivative demand, creating many 'traps' on the upward journey.
SOL experienced massive liquidations while spot capital flows remained weak.
The price surge of Solana (SOL) was strongly supported as the funding rate soared to its highest level in 6 months on Thursday. At the same time, trading volume also exploded, reaching a six-month peak, but accompanied by a wave of fierce liquidations.
Of which, long positions were wiped out by over 55 million USD – the second-highest figure in just two weeks. Conversely, short liquidations on the same day also reached 17 million USD. These figures indicate that the market is leaning towards short-term trading, while demand in the spot market remains quite weak.
In just the last 3 days, Solana has seen capital outflows from the spot market amounting to 256 million USD, becoming the main reason for hampering the upward momentum and causing prices to enter a correction phase.
In summary, this drop mainly stems from significant selling pressure in the spot market, likely as a result of the strategy of 'hunting' leveraged positions. This reflects that SOL is not truly ready for a major breakout. Nevertheless, the current strong volatility is clear evidence that Solana is on the radar of investors.
In other words, if the 'altcoin season' continues to heat up, SOL could very well become the focal point attracting stronger liquidity flows in the near future.
