The Vulnerability of Solana's $120 Support Level Amid Rising Selling Pressure and Leverage Risk

The Solana (SOL) ecosystem, once a beacon of innovation in the blockchain space, now faces a critical juncture as its price hovers near the $120 psychological support level. This level has historically acted as a fulcrum for trend reversals, but recent technical and on-chain data suggest growing fragility. A confluence of bearish technical patterns, declining leverage metrics, and diverging market sentiment underscores the vulnerability of this key support zone.

Technical Weakness and Diverging Momentum

Solana's price action in the past quarter has painted a concerning picture. After a 60% decline from its all-time high, the asset has tested the $120 level multiple times, with mixed results. According to a report by Crypto News, the recent dip below $120 triggered automated selling mechanisms, accelerating the slide toward the lower end of its trading range. While some analysts argue this resembles a "liquidity trap" and not a true breakdown, the formation of a bearish rounded top pattern and an approaching death cross on the weekly chart signal further weakness.

The Relative Strength Index (RSI) for Solana has lingered near oversold territory, but the absence of bullish divergence-a key indicator of buying pressure-suggests hesitation among long-term holders. In the last quarter, Solana's price plummeted from $200 to $140 in under four weeks, coinciding with $1.6 billion in spot outflows and $6 billion in liquidations. This disconnection between fundamentals and price highlights a fragile market structure.

On-Chain Metrics: A Tale of Two Narratives

On-chain analytics reveal a duality in Solana's narrative. While open interest in perpetual futures has dropped 62% to $3.36 billion since late August 2025, indicating reduced speculative leverage, institutional inflows have surged. The BSOL ETF alone recorded $417 million in inflows during its debut week, countering retail caution. However, this divergence between spot and derivatives markets-a stable $135 price versus declining open interest-raises questions about the sustainability of current levels.

Funding rates for Solana's derivatives have turned negative, averaging -0.17% in recent weeks, reflecting a bearish bias as traders reduce short positions to mitigate risk. Meanwhile, total value locked (TVL) in Solana's ecosystem has surpassed $40 billion, yet the spot price remains at a premium exceeding three times this metric. This valuation disconnect suggests external capital flows, rather than intrinsic on-chain activity, are propping up the price.

Institutional Optimism vs. Macro Risks

Institutional confidence in Solana has grown, with entities like Upexi increasing holdings by 82% and committing to a $50 million buyback. These moves, coupled with integrations by Cash App and Western Union, underscore Solana's real-world utility. However, macroeconomic risks-such as ETF inflow pauses and excessive leverage in the broader crypto industry-loom large.

The $120 support level remains a critical battleground. A breakdown could expose deeper support zones around $95, potentially triggering a retracement to 2023 levels. Conversely, a successful hold and stabilization above the 7-day simple moving average might reignite bullish momentum, with some analysts projecting a rebound toward $200–$280.

Conclusion: A Delicate Balance

Solana's $120 support level is under siege from both technical and on-chain headwinds. While institutional inflows and ecosystem growth provide a floor, the interplay of bearish patterns, declining leverage, and macroeconomic uncertainty creates a precarious environment. Investors must closely monitor price action above $120 and the 7-day SMA, as well as on-chain metrics like TVL and funding rates, to gauge whether this level will hold or succumb to further selling pressure.