Solana breaks below the $100 psychological level! ETF funds show the first "outflow" signal

Solana fell below $100 on Monday, with a weekly decline of over 15%. The financing rate turned negative to -0.0080%, the long-short ratio dropped to 0.97, and the ETF experienced a net outflow of $2.45 million for the first week. RSI dropped to 25, indicating extreme oversold conditions, and the MACD remains in a death cross. The daily close fell below the $100 target to $95.26, further testing the $79 level.

Derivatives Market Fully Bearish, Financing Rate Turns Negative

(Source: Coinglass)

Data on Solana derivatives indicates a bearish outlook. Coinglass’s open interest weighted financing rate shows more traders betting on further declines in SOL than on price increases. The indicator turned negative on Saturday and was -0.0080% on Monday, suggesting bears are earning returns at the expense of bulls and indicating a market sentiment that is pessimistic about Solana.

The financing rate mechanism is one of the core indicators in the perpetual contract market. When the rate is positive, longs pay shorts, reflecting bullish sentiment. Conversely, when it turns negative, shorts pay longs to maintain their positions, signaling a bearish market sentiment for Solana. The current -0.0080% negative financing rate indicates traders shorting SOL are willing to pay to hold their positions, showing strong confidence in a downward move.

(Source: Coinglass)

Additionally, Coinglass’s Monday data shows the SOL long-short ratio at 0.97. This ratio below 1 indicates a bearish market sentiment, as more traders are betting on a decline in SOL’s price. The ratio is calculated by dividing the number of long positions by short positions. A ratio of 0.97 means 100 long positions are matched with 103 short positions, giving shorts a slight but clear advantage. This imbalance often reinforces trend movements, as more traders tend to follow the prevailing direction.

The combination of financing rate and long-short ratio provides a more comprehensive market picture. If the rate is negative but the ratio is above 1, it might be a short-term hedge or speculative shorting. However, when both indicators point to bearishness, it suggests the overall market sentiment has shifted, often a precursor to trend continuation. Historical data shows that when Solana’s financing rate remains negative and the long-short ratio stays below 1, the price tends to undergo deeper corrections.

ETF Weekly Outflows First Ever Indicate Institutional Confidence Wavering

(Source: SoSoValue)

Last week, institutional demand for Solana also weakened. Data from SoSoValue shows that the spot exchange-traded fund (ETF) experienced a net outflow of $2.45 million, marking the first weekly outflow since its launch. Continued and increasing outflows could lead to further price declines for SOL. The significance of this “first” is both psychological and technical.

Since its launch, Solana’s ETF has maintained a net inflow trend, with continuous buying even during market corrections, reflecting long-term institutional confidence. However, last week’s outflow broke this pattern, indicating some institutional investors are reassessing their Solana holdings. While $2.45 million is not large, the change in direction is more important than the amount.

ETF fund flows are the most direct reflection of institutional sentiment. Unlike retail investors, institutions make decisions based on strict risk management frameworks and macroeconomic analysis. When uncertainty rises, institutions tend to reduce holdings in high-risk assets first. As a relatively new ETF product, Solana’s institutional holders are just beginning to be tested. The first weekly outflow could be a short-term fluctuation or the start of a trend reversal.

What’s more concerning is that this outflow occurred without obvious negative news on Solana’s technical or fundamental outlook. If caused by network outages or major security breaches, the market might interpret it as event-driven. However, in the absence of clear catalysts, the outflow could reflect a pessimistic outlook on the overall crypto market or concerns about Solana’s valuation being too high.

If ETF outflows persist and intensify, a negative cycle could form. Outflows lead to price declines, which trigger more redemptions, further depressing the price. This spiral was seen during the 2022 FTX collapse, when SOL plunged from $260 to $8, a decline of over 96%. While current conditions are far from that extreme, continued ETF outflows warrant close attention.

Technical Analysis: Losing $100 Could Test $79

(Source: Trading View)

Solana’s price was resisted at the weekly resistance of $126.65 on Wednesday, with a weekly decline of over 15% on Sunday, breaking below the key psychological level of $100. As of Monday, SOL traded at $99.60. The $100 level is highly significant psychologically in crypto markets; crossing below it often triggers technical trading and stop-loss orders. Breaking this level can set off a chain reaction.

If Solana closes daily below $100, the downtrend could continue, testing the April 7 low of $95.26. A further close below that could target the January 23, 2024 low of $79. These support levels are based on historical price structures. The $95.26 level is a previous low during correction, often a first target in technical retracements. The $79 level is a deeper support, representing the bottom of the early 2024 bear market.

The Relative Strength Index (RSI) on the daily chart is at 25, indicating extreme oversold conditions and a strong downward momentum. RSI below 30 is generally considered oversold, and a reading of 25 is in the extreme oversold zone. However, in a strong downtrend, RSI can remain in oversold territory for weeks, with prices continuing to fall. Therefore, oversold conditions alone do not justify an immediate rebound and may instead signal panic selling that has yet to end.

The Moving Average Convergence Divergence (MACD) also formed a death cross on January 19, with the red histogram bars continuing to extend below the neutral level, further reinforcing a negative outlook. The MACD death cross is a key trend reversal signal; when the fast line crosses below the slow line from above, it typically marks the end of an uptrend and the start of a downtrend. Since January 19, this death cross has persisted for over two weeks, indicating a resilient downtrend.

Key Technical Levels for Solana

Current Price: $99.60 (below psychological level)

First Support: $95.26 (April 7 low)

Second Support: $79 (January 23, 2024 low)

Rebound Resistance: $126.65 (weekly resistance)

On the other hand, if SOL manages to recover, it could continue upward toward the weekly resistance at $126.65. However, such a rebound would require multiple conditions: financing rate turning positive from negative, the long-short ratio rising above 1, ETF inflows resuming, and RSI bouncing from oversold levels and breaking above 50. Until these conditions are met, any rebound should be viewed as a technical correction or a chance to reduce holdings on rallies.

From a wave theory perspective, Solana may be completing a larger correction wave. If $79 is the target of this correction, the decline from the $260 high to $79 is about 70%, which is within the normal range for crypto bear market corrections. During the 2022 FTX collapse, Solana fell from $260 to $8, a decline of over 96%, making the current correction relatively moderate.