Solana futures open interest nears all-time high — Will SOL price follow?

Key points:

• Solana held the $140 support level for a week, a first in more than two months, highlighting traders’ growing confidence.
• SOL futures open interest hit $5.75 billion on April 30, showing strong institutional interest.
• With rising DEX volumes and a $9.5 billion TVL, SOL could rally to $200 before a potential spot ETF approval on Oct. 10.

Solana’s native token, SOL (SOL), fell 4% between April 29 and April 30 after failing to sustain the $150 level. Despite this short-term decline, traders seem more confident as the $140 support remained intact for a whole week, an outcome that hadn’t happened in over two months

As demand for leveraged SOL positions reached near record highs on April 30, traders are now reconsidering the chances of a SOL rally above $200.

Solana futures aggregate open interest, SOL. Source: CoinGlassSOL futures open interest climbed to 40.5 million SOL on April 30, marking a 5% increase from the previous month and nearing its all-time high. In dollar terms, this represents $5.75 billion in futures positions, ranking third in the cryptocurrency market and over 50% higher than the demand for XRP derivatives. This strong adoption of SOL derivatives points to growing institutional interest.

Data shows increased demand for bearish leveraged SOL positions

Traders often believe that increased demand for SOL futures signals rising optimism. However, since longs (buyers) and shorts (sellers) are always matched, a rise in open interest does not necessarily indicate a bullish outlook. To better understand leverage demand in SOL futures, one can look at the funding rate for perpetual contracts.

ETH perpetual futures 8-hour funding rate. Source: Laevitas.chCurrently, the funding rate on SOL perpetual futures is negative, which shows more demand for bearish positions. The last period of moderate optimism ended on April 25 after a failed attempt to break above $156. The lack of bullish leveraged positions may be partly due to the 43% price gain SOL saw in the three weeks from April 8 to April 29.

A $200 target for SOL may seem ambitious, but the token was trading near $195 in mid-February, even after decentralized application volumes had dropped by 80% from their January peak. While Solana has faced criticism for its heavy reliance on memecoins, there is more to the network than just speculation on new tokens.

Total value locked (TVL) on Solana Network, USD. Source: DefiLlamaSolana ranks second in total value locked (TVL), with $9.5 billion in deposits, including liquid staking, collateralized loans, automated yield platforms, and synthetic derivatives. Several Solana decentralized applications are among the top fee earners, with Meteora collecting $19.1 million in seven days, followed by Pump-fun with $18.6 million and Juto with $14.6 million.

Solana network dominates volumes on decentralized exchanges

Since April 14, Ethereum’s average base layer transaction fee has been $0.65 or less, yet Solana’s decentralized exchanges have seen nearly 90% higher trading volumes. Even when including the entire Ethereum layer-2 ecosystem, Solana led the past week with $21.6 billion in decentralized exchange activity.

Decentralized exchange volumes, 7-day market share. Source: DefiLlamaPositive highlights from the Solana network include an 87% weekly increase in Raydium’s volumes and a 58% rise in Meteora activity. So, even if demand for bullish leveraged positions stays flat, SOL’s price could eventually reflect the improved onchain metrics.

Related: More than 70 US crypto ETFs await SEC decision this year

From a trading perspective, SOL could also benefit from the possible approval of a spot Solana ETF in the United States. Analysts believe the final deadline for the US Securities and Exchange Commission’s decision is Oct. 10, with a 90% chance of approval. Still, SOL might rally above $200 before this event, as the network is well-positioned to attract new retail investors.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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