Solana Enters Bear Territory: Realized Loss Now Outweighs Profit

On-chain data indicates that the Realized Profit/Loss Ratio of Solana has recently declined, suggesting that liquidity for the SOL token is diminishing.

Key Takeaways

Solana's Realized Profit/Loss Ratio has dipped into a loss zone, indicating weakened liquidity.
Glassnode reports that the current liquidity levels mirror those found in bear markets.
Since November, losses have started to outweigh profits, signaling investor capitulation.
The future of SOL’s liquidity and pricing remains uncertain, potentially influenced by market conditions and overall investor sentiment.

Solana

Understanding Solana's Current Liquidity Situation

Recent data from the on-chain analytics company Glassnode shows that Solana's liquidity has shrunk to levels typically associated with bear markets. Liquidity in a cryptocurrency can be evaluated in several ways, and here, Glassnode has focused on the Realized Profit/Loss Ratio.

This specific metric measures the ratio of profits to losses that all SOL investors are realizing through their transactions. It evaluates the transaction history of coins sold on the network to determine the price at which they were last traded. If the last selling price of a token was lower than its latest selling price, that sale is counted as a realized profit. Conversely, if the latest sale price is lower than the previous transaction price, it counts as a loss.

The realized profit or loss for any transfer is the difference between the current market price and the last sale price. Glassnode aggregates these values to compute the ratio of profits to losses.

Here’s a chart illustrating the trend of the 30-day moving average (MA) of the Solana Realized Profit/Loss over the past few years:

Solana Realized Profit/Loss

The chart indicates that the 30-day moving average for this metric has recently fallen into the loss territory.

From the graph, we can see that the Solana Realized Profit/Loss experienced a significant rise during the price rally in September, indicating that many investors were taking profits. However, following the price peak in October, the value of this metric rapidly declined.

By November, the Realized Profit/Loss fell below the crucial 1 mark as the value of SOL decreased. A metric value under 1 indicates that losses are being realized at a greater rate than profits. Since this drop, the indicator has continued to decline deeper into the loss-taking region, hinting at increasing investor capitulation.

Glassnode has observed that this trend suggests “liquidity has contracted back to levels typically seen in deep bear markets.” Solana experienced similar conditions during the bear market of 2022, lasting several months before finding a price bottom.

It remains to be seen whether the current low liquidity will persist, or if the fall into loss territory is merely a temporary situation for this indicator.

Current Price of SOL

After reaching $144 on Tuesday, the price of Solana has retreated back to $138.

Solana Price Chart

The price of Solana shows an overall upward trend in recent days.