Solana (SOL) has seen bearish sentiment emerge in its derivatives market, with annualized funding rates for perpetual futures nearing zero. Additionally, the trading premium on put options indicates professional traders are cautious about price action. Despite leading in Decentralized Exchange (DEX) volume, Solana faces stiff competition in perpetual contracts from Hyperliquid.
On Thursday, the annualized funding rate for SOL perpetual futures hovered near 0%, signaling weak demand for long positions. Shorts have dominated leverage demand over the past month, a rare occurrence in crypto markets where traders typically exhibit optimism. Normally, even in a neutral market, capital costs and exchange risks alone would push funding rates to around 9%.
The SOL options market also corroborates professional traders' concerns about the $87 level holding.
On Thursday, 30-day option implied volatility (put-call skew) rose to 12%, meaning put options trade at a higher premium compared to their equivalent call options. Even though SOL trades significantly below its all-time high of $70, whales and market makers are unwilling to take on potential downside price risk. Part of this pessimism stems from a waning appeal in Solana's decentralized application (DApp) sector.
Weak on-chain data coupled with a pessimistic derivatives market may delay SOL's price recovery. Some companies that have chosen digital assets as part of their corporate asset allocation strategy, such as Forward Industries (FWDI US) and DeFi News Development Corp. (DFDV US), are already experiencing unrealized losses on their SOL holdings, further exacerbating negative sentiment. In summary, both weak on-chain activity on Solana and a lack of enthusiasm in the derivatives market suggest that a bullish breakout towards $110 might take longer than anticipated.