New Address Deposits 4 Million into HyperLiquid to Short SOL with 3x Leverage

A newly created wallet deposited $4 million into HyperLiquid to short Solana (SOL) with 3x leverage. This activity, according to on-chain analytics, reflects growing bearish sentiment among traders and investors. The short position, valued at $6.15 million, was opened at the $122.91 level, signaling confidence in further downward movement.

SOL has fallen below $118, a critical support level it had maintained since March 2024. This breakdown has increased pressure on the asset, with the price currently trading near $115. The loss of this support suggests that further downside could be imminent.

Derivatives data shows that short leveraged positions on SOL totaled $55.15 million, while long leveraged positions reached $241 million. This imbalance highlights the market's tension and readiness for sharp price swings in either direction.

Why Did This Happen?

The recent sell-off in SOL is part of a broader decline in the crypto market. On-chain data indicates that U.S.-based Solana ETFs recorded a $2.22 million outflow, signaling capital withdrawals from the asset. This trend has also been seen on Wall Street, where institutional traders have been cautious about exposure to digital assets.

SOL's price action over the past week has been bearish. Weekly charts show the asset failing to hold the $118 level for the first time since March 2024. The failure to rebound from this support has led analysts to expect a potential 30% drop to the $78 level.

How Did Markets React?

SOL's trading volume surged by 105% to $7.60 billion over the last 24 hours, indicating strong market participation. Traders are closely watching key price levels: $112.8 on the downside and $120.2 on the upside. These levels have large leveraged positions, with the 50-day Exponential Moving Average (EMA) and the Average Directional Index (ADX) confirming the bearish trend.

In the derivatives market, traders are preparing for further volatility. The ADX, which measures trend strength, has risen to 33, above the 25 threshold, suggesting a strong bearish move is underway.

On-chain metrics also show a bearish bias. Open Interest (OI) for SOL declined by 1.24% to $6.37 billion, with $22.31 million in long liquidations versus $4.39 million in short liquidations. This suggests capital is being withdrawn from bullish positions.

What Are Analysts Watching Next?

Analysts are watching whether SOL can close below the $118 level, which would confirm a continuation of the bearish trend. If the price remains below that level, further declines toward $78 are a real possibility.

Market observers are also monitoring the Fear and Greed Index, which is currently at 14, indicating extreme risk-off sentiment. If this trend continues, it could accelerate the sell-off.

Institutional demand for SOL is also a key factor. While on-chain transaction volumes hit an all-time high of 150 million on Tuesday, institutional inflows have remained weak, with three outflow days over the last three weeks. This divergence between user activity and capital flows adds complexity to the market outlook.

The broader market environment is also a concern. Total crypto liquidations over the past 24 hours reached $735 million, with $529 million in long liquidations. This highlights the risk of further capital erosion.

Market participants are also watching developments in the U.S. and Russian crypto markets. For example, the Moscow Exchange announced plans to launch futures contracts for Solana, XRP, and TRX, expanding institutional access to crypto derivatives.

As the market continues to digest these developments, traders are bracing for increased volatility. Short-term bearish positioning remains strong, but the potential for a reversal cannot be ruled out given the high level of market participation.

SOL's price action, combined with growing bearish sentiment and large leveraged positions, suggests the asset is in a critical phase. The coming days will be pivotal in determining whether this bearish momentum continues or if a reversal is in the works.