Solana (SOL) has experienced a sharp 35% price drop in recent weeks, falling to around $160 just ahead of a major token unlock event tied to the FTX bankruptcy estate. Despite reaching a new all-time high on January 19, the momentum has reversed as market sentiment turns increasingly bearish. With 11.2 million SOL tokens—worth approximately $1.78 billion—set to unlock on March 1, traders and analysts are bracing for further downward pressure.
This article explores the factors driving Solana’s current price action, analyzes on-chain and technical indicators, and evaluates potential price outcomes in the wake of the upcoming unlock.
The FTX Estate Unlock: A Looming Supply Shock
On March 1, the FTX estate is scheduled to release 11.2 million SOL tokens into circulation. This distribution is part of the court-mandated asset liquidation following the exchange’s 2022 collapse. While such unlocks are not uncommon in crypto, their timing and scale can significantly influence market dynamics.
Historically, large token unlocks have coincided with increased selling pressure, especially when holders are motivated by liquidity needs rather than long-term conviction. In this case, the FTX estate may be under pressure to convert assets into cash to meet creditor obligations—raising concerns about a potential flood of supply hitting an already fragile market.
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The psychological impact of this unlock cannot be overstated. Even before the actual release, Solana’s price began its descent, suggesting that traders are pricing in the risk of further downside. The anticipation alone has been enough to erode confidence and deter new buying interest.
Bearish Sentiment Confirmed by On-Chain Data
On-chain metrics are painting a consistently bearish picture for Solana. According to data from Santiment, Solana’s funding rate in the derivatives market has turned negative—a strong signal of prevailing pessimism.
The funding rate reflects the cost of maintaining leveraged positions in perpetual futures markets. When it's positive, longs (buyers) pay shorts (sellers), indicating bullish sentiment. Conversely, a negative funding rate means shorts are paying longs, which typically occurs when traders expect prices to fall.
In Solana’s current case, the negative funding rate suggests that the majority of leveraged traders are betting on further declines. This kind of positioning can create self-reinforcing downward momentum, especially during periods of low liquidity or high volatility.
Moreover, there has been a noticeable lack of accumulation activity from large wallets. Smart money indicators show minimal buying from entities historically known for contrarian entries. Without strong demand emerging to absorb the incoming supply, SOL remains vulnerable to extended losses.
Technical Analysis: Key Support Levels Under Threat
From a technical perspective, Solana’s chart structure has deteriorated significantly over the past month.
Breaking Below Key Moving Averages
The price has now fallen below the 20-day Exponential Moving Average (EMA), a widely watched short-term support level. This breach signals weakening bullish momentum and increases the likelihood of deeper corrections. The 20 EMA had previously acted as dynamic support during uptrends, but its failure suggests a shift in market control to bears.
Fibonacci Retracement Levels in Focus
Solana is also approaching the 0.236 Fibonacci retracement level on its daily chart. A break below this level could open the door to more substantial downside, with initial targets near $120—the 6-month low. This would represent a nearly 40% drop from recent highs.
The Relative Strength Index (RSI) further supports this bearish outlook. Since the start of the correction, RSI has been trending downward without showing any signs of bullish divergence—a pattern that typically precedes reversals. The absence of such a signal implies that selling pressure remains intact and no strong accumulation phase has begun.
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Potential Upside Scenario
While the near-term outlook is cautious, a reversal remains possible if demand surges unexpectedly. Should buyers step in aggressively post-unlock, Solana could challenge resistance at the 0.618 Fibonacci level—around $228.13. However, this scenario would require strong volume support and a shift in market sentiment, neither of which are currently evident.
Historical Context: How Past Unlocks Affected SOL
Over the past 17 token unlock events involving Solana, historical data shows that recipients often waited several months before selling their allocations. This delayed selling helped mitigate immediate market impact and allowed prices to stabilize.
However, the FTX estate situation differs significantly. Unlike individual or institutional investors who may hold long-term views, estate administrators are likely focused on fulfilling legal and financial obligations quickly. This operational urgency increases the probability of prompt sales, potentially amplifying short-term volatility.
If a significant portion of the unlocked tokens enters the market within days or weeks, it could overwhelm existing demand and trigger stop-loss cascades—especially if other altcoins are also under pressure.
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Frequently Asked Questions (FAQ)
Why is Solana’s price dropping before the unlock?
Solana’s price is declining ahead of the unlock due to anticipatory selling. Traders expect increased supply from the FTX estate release and fear downward pressure on prices, leading to early exits and reduced buying interest.
How much SOL is being unlocked from FTX?
A total of 11.2 million SOL tokens—valued at approximately $1.78 billion at current prices—are scheduled to be unlocked on March 1 as part of the FTX bankruptcy proceedings.
Could Solana rebound after the unlock?
Yes, a rebound is possible if demand exceeds supply. If institutional or retail buyers absorb the unlocked tokens aggressively, SOL could reverse course and target resistance levels near $228. However, this depends on broader market conditions and sentiment recovery.
What is a negative funding rate in crypto?
A negative funding rate occurs in perpetual futures markets when short positions pay long positions to maintain their trades. It indicates bearish sentiment, as more traders are betting on price declines.
Is Solana a good long-term investment?
Solana remains a top-tier blockchain with strong fundamentals, including high throughput and growing decentralized application (dApp) activity. However, short-term volatility—especially around events like token unlocks—can create risks for investors without a long-term horizon.
What happens if SOL breaks below $160?
A sustained break below $160 could trigger further selling toward $120, especially if no strong support emerges. This level represents a critical psychological and technical threshold for investor confidence.
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Final Outlook: Caution Ahead of Unlock
Solana’s recent price action reflects growing anxiety around the March 1 token unlock from the FTX estate. With technical indicators pointing downward, on-chain sentiment turning bearish, and structural support weakening, the path of least resistance appears lower in the short term.
While Solana’s long-term prospects remain tied to its technological strengths and ecosystem growth, near-term headwinds are substantial. Investors should prepare for continued volatility and monitor post-unlock trading volume closely to assess whether selling pressure subsides or intensifies.
As always in crypto markets, timing and risk management are crucial—especially when navigating scheduled supply events with uncertain demand responses.