A wallet associated with the Galaxy network recently transferred 200,000 Solana [SOL] tokens to Binance, OKX, and Bybit, injecting approximately $16 million worth of fresh supply into the exchanges.
Simultaneously, the daily spot netflow turned positive by $1.95 million, as reported by CoinGlass analytics, breaking a trend of negative flows that had persisted for months.
When cryptocurrencies are moved to exchanges, traders anticipate potential market distribution. Some traders reduce their exposure immediately, while others position themselves for increased volatility.
Given that this transfer coincides with the price of SOL hovering near a key support level, the market’s reaction becomes crucial. If sellers take advantage of the added liquidity, downside pressure could intensify rapidly.
On the other hand, if buyers absorb the new supply aggressively, the market may interpret the transfer as a catalyst for a short-term rebound rather than a trigger for a breakdown.
Can Solana break out of its descending channel?
SOL has been trading within a well-defined descending channel on the daily chart. After losing the $89.75 level, the price is now around $80.09, with a broader demand region between $78.07 and $89.75.
The next major resistance above current levels is at $119.41, followed by the previous structural supply at $147.28. Despite several rally attempts since November, SOL has failed to break above the channel resistance.
The formation of lower highs consistently reinforces the bearish structure, although strong buying interest has previously been seen around the $78 region.
If bulls decisively defend this zone, a relief rally towards $89 could be on the cards. However, if sellers break the support level, the channel structure may lead to further losses towards deeper liquidity pockets below.
The daily RSI is currently at 26.86, with its moving average around 27.92. These readings indicate oversold conditions, which often precede short-term reflex rallies. However, sustained downtrends can keep the RSI suppressed for extended periods.
Until the RSI climbs back above 30 and holds, the risk of downside continuation remains. Traders need to closely monitor whether momentum shifts upwards or continues to decline under persistent pressure.
Source: TradingView
Why is Solana’s price declining?
The Spot Taker CVD data over the past 90 days indicates a clear dominance of buyers in the market. Despite this, the price of SOL continues to form lower highs within the descending channel.
This divergence creates structural tension, where buyers are active but the price is declining. It suggests that larger passive sellers may be quietly capping any rally attempts.
Furthermore, thin liquidity above current price levels could hinder sustainable price expansion. If the Spot Taker CVD maintains its upward trend while the price stabilizes above $78, accumulation could gain credibility.
However, if the price breaks below support despite persistent buyer aggression, long positions may unwind quickly, accelerating a downward move.
Leverage dynamics above and below
The Binance SOL/USDT liquidation heatmap indicates a concentration of leverage just above the current price levels. Short liquidations are clustered in the low-to-mid $80s, while significant liquidity is present below the $78 support area.
These liquidity clusters act as magnets for volatility, with price often gravitating towards these zones before determining its direction. Currently, SOL is trading around $80, positioned between opposing liquidity pools.
If buyers push the price into the overhead clusters, a cascade of short liquidations could trigger a sharp squeeze. Conversely, if sellers push below support, long liquidations may lead to a swift downward move.
This compression indicates an imminent expansion in volatility. Traders are closely monitoring which liquidity pool the price targets first, as this reaction could determine the next significant move.
In summary, the $16 million influx of tokens into exchanges has increased tension around a critical support level. While the market structure favors sellers, aggressive buying activity continues. The RSI indicates exhaustion but not a confirmed reversal.
The compression of liquidity between overhead shorts and vulnerable longs suggests an imminent volatility expansion. If traders defend the demand and squeeze shorts, SOL could experience a significant relief rally.
However, if exchange liquidity leads to distribution, the descending channel could result in decisive losses. The market’s reaction will determine SOL’s next directional breakout.
Final Thoughts
- The trader reaction around the $78 support level now carries more weight than the initial impact of the $16 million exchange influx.
- The compressed liquidity between overhead shorts and vulnerable longs increases the likelihood of significant volatility expansion in the near future.
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