FTX’s Solana Liquidation Drives SOL Price Down

Solana (SOL) has found itself at a crossroads as the cryptocurrency faces significant pressure from the liquidation of 11.2 million SOL tokens tied to FTX’s bankruptcy. The unlock, which took place on March 1st, has raised concerns of a potential sell-off, with tokens valued between $1.5 billion and $2 billion now entering the market. As fears of a massive liquidation grow, Solana’s price has dropped dramatically, sending shockwaves through the market and casting doubt on the future of this once-promising blockchain.

The Token Unlock and Its Impact on Solana’s Price

Solana’s price has fallen from its February high of $224 to around $140 in the wake of FTX’s token unlock. This sharp decline of over 30% can be attributed to concerns surrounding the liquidation of these 11.2 million SOL tokens, which are being released from FTX’s estate. Unlike traditional vesting schedules, this release has raised fears that FTX may sell these tokens to satisfy creditor claims, triggering an influx of SOL into the market.

The selling pressure from this token unlock, combined with large transfers of SOL to exchanges, has caused bearish sentiment to take hold. As the market reacts to the potential for further liquidations, Solana’s price is feeling the strain.

Declining Activity on Solana’s Network

Beyond the price drop, there are concerns over Solana’s broader ecosystem. Data from Glassnode reveals that the network’s transfer volume has fallen by 99% since late 2024. In November, transfer volume reached $1.99 billion, but by February 2025, it had collapsed to just $14.57 million. This dramatic decline signals a loss of activity on the network, which could undermine investor confidence.

Additionally, the Total Value Locked (TVL) within Solana’s DeFi ecosystem has also been shrinking. The TVL dropped below $9 billion in February 2025, a 40% decrease in just one month, with more than $500 million moving to competing blockchains. This shift highlights growing competition and concerns about Solana’s ability to maintain its position in the DeFi space.

Investor Sentiment: Panic Selling or Strategic Move?

While many market participants are panicking, others see potential in the current price levels. Arthur Cheong, founder of DeFiance Capital, noted that he participated in an OTC deal at $64 per SOL through Galaxy Digital and believes the price will be much higher in a few months. Despite the current volatility, he holds his position, signaling that some investors view this dip as a buying opportunity.

However, analysts warn that the FTX liquidation process could still exert downward pressure on SOL’s price. If more tokens are sold to satisfy creditor claims, Solana’s price could drop further, potentially approaching the $125-$130 range.

FTX’s Bankruptcy: A $2 Billion Overhang on Solana

FTX’s bankruptcy proceedings have resulted in millions of SOL tokens being sold to institutional investors at a fraction of their market price. Galaxy Digital was the largest buyer, acquiring 25.5 million SOL at an average price of $64 per token. With SOL trading around $143, these investors have seen significant gains. However, the ongoing liquidation process means more SOL could be sold in the future, adding further pressure to the market.

What’s Next for Solana?

Solana now faces a critical juncture. Will it recover from this volatility, or will the continued liquidation of FTX’s assets push SOL further down? The next few weeks will be crucial in determining whether the blockchain can regain its footing. With declining network activity and growing competition, Solana must address these challenges to avoid further declines.

In conclusion, the market is at a tipping point. Whether this is a “buy the dip” opportunity or a sign of deeper issues within Solana’s ecosystem, investors must proceed with caution as the situation unfolds. As Solana’s price continues to struggle, all eyes will remain on how the market reacts in the coming weeks.

Conclusion:

Solana’s future hangs in the balance as FTX’s liquidation continues to shape its price movement. The release of billions of dollars in SOL tokens has raised concerns of a prolonged sell-off, but some investors see potential in the current dip. Whether Solana can recover or faces further challenges will depend on how it navigates these uncertain times.