Solana Whales Bet Bearish on Deribit as SOL Price Drops Ahead of Unlock

What to Know

• SOL block trades on Deribit accounted for 25% of total Solana options activity last week.
• Most block trades were in put options, signaling hedging or bearish sentiment among whales.
• Solana’s on-chain activity has slowed, while an upcoming 11.2 million SOL unlock is set to increase market volatility.

Solana’s Options Market Sees Surge in Bearish Bets

Solana’s (SOL) options market on Deribit is seeing increased activity as large investors (whales) bet on further price declines. Amid a prolonged downtrend, whales have been actively trading put options, a move that suggests expectations of continued bearish momentum. The increased options activity coincides with weakening on-chain fundamentals and an impending large-scale token unlock.

Whale Activity Dominates SOL Options Trading

Last week, block trades on Deribit totaled $32.39 million in notional value, making up nearly 25% of the total Solana options volume of $130.74 million, according to Amberdata. This marked the second-highest proportion of block trades relative to total SOL options activity on record.

Block trades refer to privately negotiated transactions between institutional investors or large traders, executed outside the regular order book to minimize market impact. The dominance of put options in these trades highlights the increasing bearish sentiment among sophisticated traders.

Bears Take Control: Majority of SOL Trades Are Put Options

Data from Amberdata reveals that nearly 80% of last week’s SOL block trade volume was in put options, compared to just 40% for Bitcoin (BTC) and 37.5% for Ethereum (ETH). This stark contrast suggests that traders are significantly more cautious about SOL’s short-term prospects compared to other major cryptocurrencies.

Put options allow traders to sell the underlying asset at a predetermined price, providing protection against potential declines. The increased demand for these contracts signals that whales are hedging against potential price drops or positioning for profits in case of an extended downturn.

SOL Faces Headwinds: Declining On-Chain Activity and Token Unlock

Solana has been under pressure following a sharp 46% drop in price over the past five weeks, falling from over $295 to approximately $160. This decline coincides with a slowdown in on-chain activity, a factor that has historically influenced SOL’s valuation.

Data from Artemis shows that daily transactions and trading volumes on Solana-based decentralized exchanges (DEXs) have significantly declined since mid-January. Solana had previously gained momentum as a go-to blockchain for memecoin traders, but activity peaked following the launch of the TRUMP token on January 17.

With transaction volumes dwindling, the bullish case for SOL weakens, leading investors to adopt a more cautious approach.

Major Token Unlock Set to Increase Market Volatility

Adding to the bearish outlook is a major upcoming token unlock. On March 1, approximately 11.2 million SOL tokens, valued at around $2.07 billion, will be released into the market. This accounts for 2.29% of SOL’s total supply and represents a significant liquidity event.

Lin Chen, Deribit’s Asia Business Development Head, highlighted that a considerable portion of this unlock originates from the FTX estate and a foundation sale. Given that the newly unlocked tokens will enter circulation, the increased supply could exert additional downward pressure on SOL’s price.

“The unlock represents nearly 59% of SOL’s daily spot trading volume, which could trigger substantial volatility,” Chen explained. “As a result, it’s natural to see significant hedging flows in put options.”

Market Reaction: Traders Betting on Volatility

Apart from bearish put option plays, traders are also positioning themselves to profit from increased volatility. Chen noted that many traders are looking to capitalize on market swings by taking long volatility positions, a strategy designed to generate returns from heightened price fluctuations.

With uncertainty looming over SOL’s price trajectory, options traders are bracing for a turbulent period ahead. Whether the token unlock leads to a sharp decline or presents a buying opportunity remains to be seen.

Final Thoughts

Solana’s options market is witnessing a surge in bearish sentiment, with whales actively hedging against further declines through put options. The upcoming token unlock and declining on-chain activity are key factors contributing to the cautious stance among traders.

While some investors see the unlock as a potential buying opportunity, others are betting on further downside. Regardless of the outcome, SOL traders should prepare for heightened volatility in the coming weeks.