Solana's price rollercoaster ride in the recent week has sent shockwaves through the market, leaving traders on edge. The futures market sentiment for SOL has taken a hit as leveraged traders hesitate to go long in the face of uncertainty.
This lack of confidence is paving the way for a potential downtrend, with SOL hovering around the $130 mark, ready to take a plunge in the short term.
Solana Struggles to Stay Afloat
SOL's negative funding rate is painting a grim picture for its futures traders, signaling a shift in bullish sentiment.
Data from Coinglass reveals that SOL perpetual futures have been stuck with a negative funding rate for the past few days, showcasing short sellers footing the bill to maintain their positions. This negative rate currently stands at -0.0060%.
Funding Rate Impact. Source: Coinglass
The funding rate acts as a toll between long and short traders in perpetual futures contracts to align the contract price with the spot market.
In the case of SOL, a negative funding rate implies that short sellers are shelling out fees to long traders, suggesting a bearish undertone in the market.
Consequently, more traders are gearing up for a potential drop in SOL's price, adding to the bearish pressure on the cryptocurrency.
Furthermore, the dwindling confidence among SOL futures traders is evident from the plummeting open interest, which stands at $3.94 billion, marking a 19% decline since the start of March.
SOL Open Interest Dips. Source: Coinglass
Open interest tracks the total number of active futures contracts awaiting settlement. A decrease in this metric, especially during a price slump, indicates traders closing existing positions rather than initiating new ones, underlining the fading belief in a short-term SOL price recovery among futures traders.
Solana Bulls Lose Steam - Will the $130 Level Hold?
Currently trading at $137.70, SOL is precariously perched just above the crucial support level of $136.62. With bullish sentiment waning, there's a risk of this level turning into a resistance zone.
If breached, SOL might see a drop below $130, potentially changing hands at $120.72.
SOL Price Evaluation. Source: TradingView
Conversely, a resurgence in bullish momentum could invalidate this bearish scenario. In that optimistic scenario, fresh demand might propel SOL's price to $182.31.
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