Solana Token Faces Volatility Amid 137% USDT Trading Surge, FTX Repayments

Investors' positioning of stablecoins on the Solana network, coupled with a significant technical chart pattern, is raising concerns about heightened volatility for the Solana token (SOL). The transport layer of Solana experienced extreme volatility in trading Tether’s USDt (USDT) stablecoin, suggesting that traders are actively repositioning to explore new investment opportunities.

During the last week of February, USDT trading on Solana's transport layer surged by over 137%, following a 61% plunge the previous week. This frenetic activity indicates an unprecedented level of trading that could signal further volatility for the SOL token. According to Petr Kozyakov, co-founder and CEO of Mercuryo, the high trading activity may suggest that the Solana network is prone to increased volatility. However, Solana's inherent strengths, such as fast transaction processing, high scalability, and an active trading ecosystem, could also be factors contributing to this volatility. The ecosystem has been attracting high trading volumes, with decentralized exchanges (DEXs) like Jupiter and Raydium generating significant interest.

A key emerging technical chart pattern, specifically a Converging Triangle on the Solana Heikin Ashi hourly chart, may be decisive for the token's price action in the near term. This pattern suggests that both bullish and bearish moves are possible, adding to the uncertainty surrounding SOL's price movements.

While the current memecoin frenzy may be siphoning liquidity from the Solana token, other factors are also influencing SOL's price action. Notably, the incoming repayments from the bankrupt FTX exchange could limit Solana's price action. The defunct FTX exchange has set up a repayment plan that involves distributing a large amount of SOL tokens to creditors, which could result in selling pressure. On March 4, FTX and Alameda Research-linked wallets unstaked $431 million of SOL tokens, marking the biggest SOL token unlock since November 2023. 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 due to court-imposed limits on liquidation amounts. Under the Delaware Bankruptcy Court's ruling, FTX 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 is scheduled for May 30, with 98% of creditors expected to receive at least 118% of their claim value in cash. The total value of the distribution is estimated to range between $14.5 billion and $16.3 billion.