Solana Plummets 11.54% Sparking Capitulation Fears

Solana, a prominent cryptocurrency, has recently experienced a significant drop, falling 11.54% from its previous range of $170–$185. This decline has sparked concerns among investors and analysts about the potential for further losses and a possible capitulation event. The net realized profit/loss for Solana has turned negative for the first time in nearly two months, indicating that many investors are now selling at a loss. At the current price of $156, this translates to approximately $323 million in realized losses, suggesting that a substantial number of buyers who purchased at higher prices are now facing significant losses or breaking even.

This shift in market sentiment is not just about the numbers; it also has a psychological impact. Market patience is wearing thin, and confidence in a potential bounce is low. Historically, such red flags have preceded major capitulation events for Solana. For instance, during the early February sell-off, Solana's price plummeted by nearly 56% over two months, bottoming near $95 in early April. Realized losses spiked during this period, and the initial FOMO (Fear Of Missing Out) that drove the price up quickly dissipated.

According to analysts, without a strong bullish catalyst to restore confidence and keep long-term holders (HODLers) invested, Solana could be on the brink of another deep correction phase. The recent 11.54% weekly drawdown might not be the bottom but rather the first leg of a broader unwind. Opportunistic shorts have taken control, and longs are getting squeezed hard, accounting for over 90% of total liquidations. This situation sets the stage for a potential short squeeze, where a sudden surge in buying could drive the price back up.

On the 12-hour Binance SOL/USDT perpetual, there is a significant liquidity cluster at $161.47, with $7.37 million in leveraged positions at risk. If this level is triggered, it could spark a short squeeze, potentially driving the price higher. However, for this to happen, bulls need to hold support levels to prevent further capitulation and reignite FOMO. Solana has already dropped below $160, with $150 now in sight. If buyers step up at this level, a short squeeze could quickly restore confidence. Conversely, if support fails, Solana could enter full capitulation, leading to further losses and a bearish market.

Currently, Solana is in a fragile position. One wrong move could unleash a massive unwind, potentially leading to significant losses for investors. The market is at a critical juncture, and the next few days will be crucial in determining whether Solana can stabilize or if it will continue its downward spiral. Investors and analysts are closely monitoring the situation, hoping for a bullish catalyst that could turn the tide in favor of the cryptocurrency.