Solana Price at Risk: Traders Mount $150M SHORT Contracts, 3-Days from Fed Decision

Solana Price Analysis:

Solana price reached a 14-day peak of $139 on Friday Sept 13, before sliding towards $130 on Sept 15 as bears to 5% forced a pullback over the weekend.

Trends observed in SOL Derivatives markets suggests bear traders are mounting leverage SHORT positions ahead of the upcoming US Fed rate decision in the week ahead.

Solana Retraces 5% as Anxiety Grows Ahead of Fed Decisions

Last week, Solana emerged one of the best performing mega cap assets. Solana’s double-digit growth performance between Sept 6 and Sept 14 was linked to bullish tailwinds for labor market and inflation indicators.

The latest Non-Farm Payrolls reports published by the US Bureau of Labor Statistics showed that the 142,000 US non-farm jobs added in August 2024, reflecting a 37% surge from the 89,000 jobs added in July. Likewise, the CPI data released on Sept 11 shows inflation is now trending at an all-time high of 314.80 points.

With rising public debt, and these key indicators signaling an overheating economy, the US Fed is now widely expected to conduct its first rate cut of 3-years, during the next FOMC meeting on Sept 17.

However as the Fed decision date draws closer, markets data show signs of growing anxiety among crypto traders.

The SOLUSD daily price action chart above shows how Solana price had rallied 16.22% as it moved from $120 on Sept 6 to hit $139 on Friday Sept 13. But bears quickly swung into action to prevent a breakout above the $140 level.

Solana price has since tumbled 5.27% to hit the $133.57 area at the time of publication on Sept 17. This mild price correction was also observed across the altcoin markets as Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) all also recorded significant pull backs over the weekend.

Solana Bears Mount $150M SHORT Contracts

Crypto traders appear to be scaling back on buying momentum amid concerns that the US Federal Reserve may not cut rates as widely expected.

This uncertainty has given rise to bearish sentiment in Solana’s derivatives market, where strategic bear traders are placing significant leveraged bets on a potential downturn.

The Liquidation Map chart below presents the total active leveraged LONG contracts versus SHORT contracts, providing insights into the prevailing sentiment within the markets.

Solana Liquidation Map | Coinglass

As seen in the chart, Solana bears have deployed leverage positions worth $150 million in SOL perpetual futures contracts, which would yield amplified profits for them if Solana declines sharply in the coming days.

On the other hand, the total value of leveraged LONG positions stands at $119 million, leaving a notable gap of $31 million in favor of the bears.

This imbalance between SHORT and LONG contracts, with SHORTs outweighing LONGs by approximately 26%, signals clear bearish dominance in Solana’s derivative market. Such a large disparity highlights the pessimistic outlook among traders, who are likely betting on a sustained downtrend or a sharp selloff.

The fact that bears are willing to wager $150 million on a price decline indicates a strong conviction that Solana will face downward pressure, especially if  the outcome of the FOMC meeting on Sept 17/18 results in a another rate pause or hike.

SOL Price Forecast: Bulls Must Hold $120 Support

Solana’s price dipped 2.81% to $133.38 on September 15, 2024, signaling potential bearish momentum ahead. The Donchian Channel (DC) shows key support at $120.62 and resistance at $159.68, suggesting a retest of the lower bound is likely. If the bulls fail to hold the $120 support, further downside pressure could push SOL into a deeper correction.

Meanwhile, the Parabolic SAR indicator remains above current price levels at $140.15, indicating that the bearish trend may persist in the near term. With price action trapped below this level, any significant upward breakout seems unlikely until the market sentiment shifts.

Despite the bearish outlook, there is potential for bulls to regroup. A US Federal Reserve rate cut could reignite buying interest, allowing SOL to accelerate towards the $150 resistance level. This scenario remains dependent on whether the $120 support holds, making it a critical level to watch.

In summary, while the short-term outlook leans bearish, a successful defense of the $120 support could set the stage for a bullish reversal, with $150 being the next key target for the bulls.