Solana Price in Danger as Investors Un-stake $580 Million SOL after Ethereum ETF Approval

Ibrahim Ajibade
Updated: May 24, 2024, 13:30 GMT+00:00

Key Points:

  • Solana price slid to 7-day low of $162 on Friday, May 24 as crypto markets react to the Ethereum ETF approval by US SEC.
  • On-chain data shows that Solana Proof-of Stake validators have un-staked 3.5 million SOL between May 20 and May 24.
  • Solana bears have mounted $285 million leveraged SHORT positions, following recent market developments.
Solana (SOL) Price

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Solana price slid to 7-day low of $162 on Friday, May 24 as altcoin markets shuffled to the Ethereum ETF approval by US SEC. With Solana node validators un-staking large amounts of coins this week, how will recent market events impact SOL price? 

Solana Price Tumbles 14% After Ethereum ETF Approval

Solana’s long-term rivalry with the Ethereum network has been brought to fore again this week. Following news of SEC approving spot ETH ETF, Solana price has experienced intense volatility.

As ETH gains market dominance amid the landmark regulatory endorsement, early market signals suggest Solana price short-term price prospects could be in jeopardy.

Solana (SOL) Price action After Ethereum ETF Approval
Solana (SOL) Price action After Ethereum ETF Approval

Solana price has been in a steep decline since May 20, when Bloomberg analysts first flagged the likelihood of SEC approving the Ethereum ETF applications ahead of the May 23 deadline.

At the time of writing on May 24, SOL price is hovering just above the $166 mark. This reflects a steep 14.31% decline from the weekly timeframe peak of $188 recorded on May 21.

While Solana price struggles for momentum, Ethereum continues to ride high, surging 25% during the week, and holding up above the $3,700 milestone price level at the time of publication.

As Ethereum ETF prepare for massive inflow of funds from regulation-sentitive investors like Pension funds, and Asset management firms across the US, it could further exacerbate this negative divergence between ETH and SOL price movements.

Solana Investors Have Un-staked SOL Worth over $580 million in 3 days

Based on recent staking trends, Solana’s core investors and node validators also appear to have grown wary of the possible impacts of Ethereum ETFs of SOL price action.

The StakingRewards chart below provides real-time data on total number of SOL coins deposited in Solana staking contract. A decline in staked coins often occurs when investors are wary of impending bearish market events, or seeking out more short-term profit opportunities.

Solana Price vs. SOL Staking Trends after Ethereum ETF Approval |Source:
Solana Price vs. SOL Staking Trends after Ethereum ETF Approval |Source:

Since the Ethereum ETF approval became apparent on May 20, Solana node validators have entered a withdrawal frenzy. As depicted in the chart above, Solana investors held a total of 368.8 million SOL in staking contracts as of May 20.

But curiously, they have since rapidly withdrawn 3.5 million SOL, cutting down the total active staking deposits to 365.3 million SOL at the time of publication on May 24.

Valued at the current Solana prices of around $166, the newly-unstaked SOL coins are worth approximately $580 million.

When a Proof-of-Stake (PoS) network witnesses such a large volumes of staking withdrawals, it often impacts price negatively in the short-term.

Firstly, when implies that investors have pull investors have flooded Solana short-term market supply with over $580 million worth of coins which were previously locked up in staking contracts.

More so, the timing suggests that some Solana’s core investors may be looking to exit early to avoid the potential bearish impact of the recent shift in Ethereum market position.

Meanwhile others could be looking to diversify from SOL into other altcoins hosted on the Ethereum network, in hopes of benefiting form the imminent influx of funds in to ETH ETFs.

If this narrative plays out, Solana price could witness more bearish headwinds, further exacerbating its 14% correction trend observed over the last 3 days.

SOL Price Forecast: Bears to Prevent $200 Breakout?

Solana price has managed to rebound above the $165 level at the time of writing on May 24, after tumbling as low as $162 within the 24-hours of the Ethereum ETF approval verdict.

However,  despite the prevailing positive sentiment surrounding the broader crypto sector, the $580 million staking withdrawals this week could hamper Solana’s prospects of hitting new price peaks above $200.

In further affirmation of this skittish Solana price outlook, SHORT traders have seized control in the SOL derivatives markets.

Solana (SOL) Price Forecast 
Solana (SOL) Price Forecast

As seen above, bearish traders have mounted over $285 million in leverage SHORT positions, betting against SOL price crossing the $183 mark in the near-term. In comparison bulls only have $148 million active leverage LONG contracts listed around the current prices.

Considering that the bears now have more skin in the game, Solana price faces and uphill task in the days ahead.

In terms of key resistance areas to watch, the largest sell-wall lies around $170 level, where over $87 million short contracts could get liquidated if prices rise further. If bulls can flip that sell-wall, a prolonged upswing towards $190 could be on the cards.

However, if the recent SOL staking withdrawals continue to flood the markets, Solana price could retrace towards next major psychological support level at $150.

About the Author

Ibrahim Ajibade Ademolawa is a seasoned research analyst with a background in Commercial Banking and Web3 startups, specializing in DeFi and TradFi analysis. He holds a B.A. in Economics and is pursuing an MSc in Blockchain.

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