Why is Solana down 6% over the past 24 hours?

Solana is down 6%, reflecting a broader decline in the markets, as liquidations contribute to volatility.

Solana (SOL) is down amid a broader market decline, caused by a spike in liquidations. On Monday, May 19, Solana dropped 6.02%, trading at $163.97 amid a sector-wide pullback caused by the ongoing macroeconomic uncertainty.

Almost all crypto tokens that aren’t stablecoins were in the red today, with a few suffering double-digit losses. Bitcoin was the least affected, only losing 0.52% and still trading at $104,770. The reason for the decline is likely due to widespread liquidations of long positions, which usually cause volatility.

The total long and short liquidations in the last 25 hours amounted to $642.65 million. For Solana, this figure was at $23 million. In both cases, most of the liquidations came from long positions. This suggests that futures traders overestimated market performance up to this point.

Liquidations, unstaking drives Solana down

A spike in liquidations has a strong effect on volatility. Specifically, liquidations increase the supply of tokens in circulation, which can put downward pressure on their price. In this context, Solana’s pullback is aligned with the broader market trend.

Still, many traders are anticipating the start of an altcoin season, which could benefit Solana. For instance, BitMEX co-founder Arthur Hayes believes that the altcoin season may start when Bitcoin reaches $110,000. This will likely prompt many investors to convert their Bitcoin gains into even bigger potential gains with altcoins.

At the same time, Solana is also seeing some positive signals. For instance, the recently approved 2X Solana ETF saw $30 million in inflows since its launch in February. This suggests that the likely approval of spot Solana ETFs in the U.S. has the potential to serve as a future price catalyst, especially as ETFs make it easier for some investors to gain exposure to crypto tokens.