Solana (SOL) experienced a 4% decline on Friday, dropping to $169, as news surfaced that bankrupt crypto exchange FTX is set to distribute $5 billion in digital assets to creditors starting May 30. This triggered concerns about further sell pressure on the cryptocurrency, particularly after a significant $236 million worth of SOL tokens were unstaked in the past week.
The recent decline marks a breakdown of support at $170 for Solana, a key psychological level, and is tied to FTX’s ongoing liquidation of assets. On May 15, the exchange confirmed plans to begin paying out creditors, with settlements processed through BitGo and Kraken. This development adds to market volatility as over 1.4 million SOL tokens were unstaked, likely including holdings once controlled by FTX.
The large withdrawal is concerning for Solana’s price, as substantial amounts of SOL may flood exchanges or over-the-counter (OTC) desks for liquidation. The decline in Solana’s price mirrors broader weakness in the Layer-1 token space, with Ethereum (ETH), XRP, and Cardano also posting losses.
Bitcoin Stability and ETF Optimism Offer Solana Support
Despite the bearish trend for Solana, Bitcoin (BTC) has remained stable above $100,000 for over a week, providing some support for the broader market. Historically, Bitcoin’s resilience has helped stabilize investor sentiment in altcoins like Solana, offering a potential lifeline if market conditions improve.
Moreover, the growing probability of U.S. Securities and Exchange Commission (SEC) approval for altcoin ETFs, with Solana potentially benefiting, has been seen as a key factor for bullish traders. PolyMarkets data shows an 82% likelihood of SEC approval for altcoin ETFs by mid-June, which could create a fresh demand catalyst for Solana.
Critical Support Levels and Downside Risk
The 4% dip in Solana’s price indicates both internal sell pressure and external market rotation. In order for the bulls to regain control, Solana needs to reclaim and hold the $170 support level. A failure to do so could push the price further down to the $160 range, with the possibility of further declines toward $145 to $150 if bearish momentum persists.
Technically, the current market structure is fragile. Solana’s price is trading below the mid-point of the Keltner Channel, with weak support at $170. If SOL fails to regain momentum above $175, a further breakdown toward $161.74 is expected, with the potential for a short-term bearish reversal if market sentiment weakens.
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