Solana Metrics Turn Bullish - Is a Decrease in Volume a Cause for Concern?

Recent on-chain metrics for Solana (SOL) indicate a strong demand and active network usage, with a significant increase in active addresses and weekly transactions. However, a noticeable decline in spot trading volume may signal potential market corrections.

Key Takeaways

Strong Demand: Solana's Active Addresses increased by 56% in one week, with weekly transactions reaching 515 million.
Market Anticipation: Derivatives positioning suggests traders expect further price increases.
Cooling Spot Volume: Decreased trading volume may indicate market consolidation or a bearish trend similar to 2022.
Positive Accumulation: HODLers have been accumulating SOL, with outflows from exchanges suggesting a bullish trend.
Long-Term Considerations: While there are positive signs for SOL, investors should carefully consider their strategies.

Solana metrics flash bullish, but cooling volume raises questions

Overview of Solana's Activity

According to AMBCrypto, recent on-chain metrics for Solana [SOL] reveal strong demand and increasing network usage. Notably, the number of Active Addresses surged by 56% over the course of just one week, while the overall weekly transactions reached an impressive 515 million.

This uptick in activity aligns with a breakout from the regression channel. Additionally, the positioning of derivatives indicates that market participants are anticipating further upward movement in prices.

Supporting this analysis, data from CryptoQuant reveals that the cumulative volume difference (CVD) for market takers was in a buying phase, indicating dominance in buy orders. The futures CVD also reflected a similar trend. These metrics, which track the net difference between buying and selling volumes over the past 90 days, signal strong bullish trends over the longer term. However, in the short term, Bitcoin [BTC] has recently dipped below the $94.5k local support but managed to recover back above $93k. Meanwhile, Solana is trading within the $130-$133 local demand area, which buyers are currently defending.

Understanding The Cooling Spot Volume

Solana Spot Volume Bubble

The spot volume bubble map provides insights into the size and fluctuation of spot trading volumes. A decrease in volume, marked in green, contrasts with the overheating indicated in red.

Since late November, spot volume has been in decline. While such a cooling phase can often accompany market consolidations and local bottoms during a sustained uptrend, current conditions suggest a potential shift in market sentiment.

What’s concerning is that the prolonged cooling phase observed recently closely resembles scenarios from 2022 rather than the more robust market of 2024-25. Historically, after new bullish cycles, lower trading volumes have often signaled the continuation of bearish trends, a pattern that could potentially be repeating.

Solana Hodler Net Position Change

Conversely, there is good news for bulls: the HODLer net position change has remained positive since the last week of December. This suggests that long-term investors have been actively accumulating SOL. Additionally, metrics reflecting exchange position changes indicate a net outflow of SOL since mid-December, reinforcing the accumulation narrative. However, while these indicators show promise, they do not guarantee a sharp price increase. This might be an opportune moment for long-term investors to consider a dollar-cost averaging approach.

Conclusion

In summary, while Solana’s metrics indicate an optimistic outlook with increasing demand and accumulation by long-term holders, the cooling spot volume should not be overlooked as it suggests potential market caution. Investors should carefully evaluate their positions and consider market dynamics before making decisions.