The market is hot, but Solana is not — Data explains why SOL price is lagging

Solana (SOL) has been successful a dependable downtrend for the past 3 months, but immoderate traders judge that it whitethorn person bottomed astatine $26.80 connected Oct. 21. Lately, there's been a batch of speculation connected the causes for the underperformance and immoderate analysts are pointing to competition from Aptos Network.

Solana terms astatine FTX, USD. Source: TradingView

The Aptos blockchain launched connected Oct. 17 and it claims to grip 3 times much transactions per 2nd than Solana. Yet, aft 4 years of improvement and millions of dollars successful funding, the debut of the layer-1 astute declaration solution was alternatively unimpressive.

It is indispensable to item that Solana presently holds an $11.5 cardinal marketplace capitalization astatine the $32 nominal terms level, ranking it arsenic the seventh largest cryptocurrency erstwhile excluding stablecoins. Despite its size, SOL’s year-to-date show reflects a lackluster 82% drop, portion the broader planetary marketplace capitalization is down 56%.

Unfortunate events person negatively impacted SOL’s price

The downtrend accelerated connected Oct. 11 aft a starring decentralized concern exertion connected the Solana Network suffered a $116 cardinal hack.

Mango Markets’ oracle was attacked owed to the debased liquidity connected the platform's autochthonal Mango (MNGO) token which is utilized for collateral. To enactment things successful perspective, the hack represented 9% of Solana's full worth locked (TVL) successful astute contracts.

Other antagonistic quality emerged connected Nov. 2 arsenic German information halfway relation and unreality supplier Hetzner started blocking crypto-related activity. The company's presumption of work prohibit customers from moving nodes, mining and farming, plotting and storing blockchain data. Still, Solana nodes person different unreality retention providers to take from, and Lido Finance confirmed that the hazard for their validators had been mitigated.

A perchance promising concern was announced connected Nov. 2 aft Instagram integrated support for Solana-based NFTs, allowing users to create, merchantability and showcase their favourite integer arts and collectibles. SOL instantly reacted with a 5.7% pump successful 15 minutes but retraced the full question implicit the adjacent hour.

To get a much granular presumption of what is going connected with SOL price, traders tin besides analyse Solana's futures markets to recognize whether the bearish newsflow has affected nonrecreational traders' sentiment.

Derivatives metrics amusement an antithetic grade of apathy

Whenever determination is applicable maturation successful the fig of derivatives contracts presently successful play, it usually means much traders are involved. In futures markets, longs and shorts are balanced astatine each times, but having a larger fig of progressive contracts — unfastened involvement — allows the information of organization investors who necessitate a minimum marketplace size.

Solana futures unfastened interest, USD. Source: Coinglass

In the past 30 days, the full unfastened involvement connected Solana has been reasonably dependable astatine $440 million. As a comparison, Polygon's (MATIC) aggregated futures presumption soared to $415 cardinal from $153 cardinal connected Oct. 3.

BNB Chain's token (BNB) displayed a akin inclination reaching $485 million, up from $296 cardinal connected Oct. 3.

With that said, unfastened involvement doesn't needfully mean that nonrecreational investors are bullish oregon bearish. The futures annualized premium measures the quality betwixt longer-term futures contracts and the existent spot marketplace levels.

The futures premium (basis rate) indicator should tally betwixt 4% to 8% to compensate traders for "locking in" the wealth until the declaration expiry. Thus, levels beneath 2% are bearish, portion numbers supra 10% bespeak excessive optimism.

Solana annualized 3-month futures premium. Source: Laevitas.ch

Data from Laevitas shows that Solana's futures person been trading successful backwardation for the past 30 days, meaning the futures' declaration terms is little than regular spot exchanges.

Ether (ETH) futures are trading astatine a 0.5% annualized basis, portion Bitcoin's (BTC) stands astatine 2%. The information is somewhat concerning for Solana since it signals a deficiency of involvement from leverage buyers.

Rumors astir Alameda Research could make much unit

It is hard to pinpoint the crushed for truthful overmuch apathy astir Solana and adjacent the implicit dominance of leverage abbreviated demand. Even much funny is Alameda Research’s power connected Solana projects. Alameda is the integer plus trading institution spearheaded by Sam Bankman-Fried.

Recently, trader and crypto Twitter influencer Hsaka raised concerns astir whether the steadfast has been suppressing SOL's terms adjacent aft bullish catalysts emerged.

It’s astir apt highly improbable that marketplace participants volition truly find retired Alameda Research's interaction connected SOL price. Still, the mentation raised by Hsaka could explicate the alternatively antithetic dependable request for leverage shorts and the antagonistic ground rate. The arbitrage and market-making steadfast could person utilized derivatives instruments to trim their vulnerability without selling SOL connected the unfastened market.

There are nary signs that abbreviated sellers utilizing SOL futures instruments are nearing liquidation oregon exhaustion, truthful their precocious manus remains until the broader cryptocurrency marketplace shows signs of strengthening.

The views and opinions expressed present are solely those of the writer and bash not needfully bespeak the views of Cointelegraph.com. Every concern and trading determination involves risk, you should behaviour your ain probe erstwhile making a decision.