Thursday was quite a neutral day for the broader crypto market. A few top coins—like Bitcoin, Ethereum—were trading in the green after noting minor upticks, while the rest—like Avalanche and Dogecoin—had noted minor corrections.
Solana’s price followed the same neutral path. At press time, the sixth-largest alt was trading at $99.5, up by 0.5% in the day’s trade.
State of the derivatives market
Usually, whenever price movements lack vitality, derivative traders tend to stay out and wait for a concrete trend to get established. A similar phenomenon has been noted in the Solana market as well.
The OI is quite a helpful metric that aids in gauging the traders’ interest with respect to a particular asset. Simply put, it takes into account the cumulative value of all the outstanding contracts on exchanges.
From mid-March to mid-April as Solana’s price inclined, SOL’s futures OI inclined. Post that, as it got into consolidation mode on the price front, the OI flattened. So, it can be deduced that new funds are not flowing into the market for now and SOL traders are currently waiting on the sidelines.
The ‘D’ factor
Deribit, one of the most prominent crypto exchanges, recently announced that it would be extending its support for SOL derivatives. Per the official announcement, 4 sets of contracts are set to launch tomorrow, on 29 April.
“Deribit will create the instruments above tomorrow morning UTC ahead of the launch to enable market participants to set up the new currency and instrument in production.”
So, the novel launch has the potential to trigger trader activity in the market. If the launch is a success and the rollout happens well, the monotonous SOL OI trend would be broken simultaneously.
Alongside, the platform is set to launch SOL options a few days later in May.
Why Solana when there are plenty of other fishes in the sea?
At this point, one may argue that on the macro frame SOL’s OI has shrunk massively and derivative traders have probably lost interest to trade this token. Well, that particularly might not be the case. Here’s why:
a) Solana is not sailing alone in the boat. The OI of most assets, including Bitcoin and Ethereum, has dipped substantially when compared to their November levels. Open Interest downtrends usually coincide with recovery phases and the said phenomenon is not new.
b) Solana continues to be one of the few institutional pets. Over the past week, institutions purchased SOL aggregately worth $800k. In fact, Solana has been able to consistently adhere to the “investors’ favorite token” trend. So, if interest was indeed fading away, then Solana would have registered outflows instead of inflows and wouldn’t have been able to make a cut to the favorite list.
c) Solana’s growth over the past 3 quarters has been impressive. From being a lesser know alt to cementing a position for itself in the top 10, Solana has already come a long way. The same speaks volumes about its adoption single-handedly.
So, Solana was perhaps waiting for some catalyst all this while to assist it to change its fortunes. And at this stage, the ‘D’ factor can help in initiating the same.