Solana stablecoin positioning threatens ‘extreme’ SOL volatility

Investors’ stablecoin positioning on the Solana network and a key technical chart pattern threaten more volatility for the Solana token, which may see a decisive moment for its price action.

Solana’s transport layer saw “extreme” volatility in trading the Tether’s USDt (USDT) stablecoin, which may indicate that traders are repositioning in search of new investment opportunities.

USDT trading on Solana’s transport layer saw an over 137% surge during the last week of February, after seeing a 61% plunge during the previous week, according to a report by global payments infrastructure platform Mercuryo, shared with Cointelegraph.

The stablecoin trading spikes show an unparalleled level of trading activity that may signal more volatility for the Solana (SOL) token, according to Petr Kozyakov, co-founder and CEO of Mercuryo.

The “frenetic activity” may “indicate that the chain is prone to be more volatile,” the CEO told Cointelegraph, adding:

“However, Solana’s inherent strengths – fast transaction processing, high scalability, and an active trading ecosystem – may also be factors. This is against a backdrop of an ecosystem attracting at times high trading volumes.”

“Notably, DEX’s on Solana, such as Jupiter and Raydium, have ignited significant interest,” he added.

Meanwhile, a key emerging technical chart pattern may be decisive for Solana’s price action in the near term.

“Solana Heikin Ashi hourly chart shows a Converging Triangle. Both bullish or bearish moves are possible,” wrote pseudonymous crypto analyst Trader Tardigrade in a March 19 X post.

Memecoins, FTX repayments may be limiting SOL price

While some analysts suggest that the current memecoin frenzy has been siphoning liquidity from the Solana token, multiple other factors are influencing SOL’s price action.

Notably, the incoming repayments from bankrupt FTX exchange may limit Solana’s price action, explained Kozyakov, adding:

“The defunct FTX exchange has set up a repayment plan that involves distributing a large amount of SOL tokens to creditors, which can potentially result in selling pressure.”

FTX and Alameda Research-linked wallets unstaked $431 million of SOL tokens on March 4, marking the biggest SOL token unlock since November 2023, Cointelegraph reported.

Although FTX and Alameda unlocked more than $400 million in SOL, the firms may not be able to sell all the tokens in a single transaction. In September 2023, the Delaware Bankruptcy Court approved FTX’s plan to sell digital assets, imposing strict limits on liquidation amounts.

Under the court ruling, the bankrupt exchange can sell digital assets weekly through an investment adviser, with an initial limit of $50 million in the first week and $100 million in subsequent weeks. If FTX seeks to sell more, it must request court approval to raise the limit to $200 million per week.

FTX’s next round of repayments will take place on May 30. Under FTX’s recovery plan, 98% of creditors are expected to receive at least 118% of their claim value in cash. In May 2024, the exchange estimated the distribution’s total value to range between $14.5 billion and $16.3 billion.

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