What happened
After hitting a new multiyear low last week, popular cryptocurrency Solana (SOL -2.62%) is rebounding nicely today. As of 1 p.m. ET, Solana has surged 15.5% higher over the past 24 hours, marking fresh weekly highs.
Today's move appears to be tied to significant liquidations of short positions in SOL, driven by renewed interest in the Solana ecosystem (and in particular, Solana-based NFTs). An airdrop tied to a new Shiba Inu-themed meme token (BONK) is set to take place, which has once again enticed NFT investors to the Solana blockchain to earn these rewards, driving renewed bullish interest in Solana.
Approximately $8.9 million in short liquidations have taken place over the past 24 hours for Solana. This is the largest short liquidation in more than a month, and has undoubtedly exacerbated today's move to the upside.
So what
Of course, it's important to keep today's move in Solana in context. This is among the most beaten-down megacap cryptocurrencies, having been booted from the top 10 list in terms of market capitalization late last year amid the FTX fallout. Solana has been among the tokens with the closest ties to the FTX-Alameda collapse, given its status as one of Sam Bankman-Fried's holdings. Investors have been concerned that forced selling could drive Solana's price lower, sparking what appears to be a self-fulfilling prophecy regarding this token's price action.
This airdrop, which will benefit Solana NFT holders and creators, is certainly a nice near-term catalyst. However, questions remain as to how sustainable this move is, considering short interest for Solana remains high.
Now what
Outside of tokens that have completely disintegrated this past year, Solana's fall from grace has been noteworthy. This is a token which traded at an all-time high of nearly $260 per token. Today, Solana can be had for around $13 apiece, and hit a low of $8.14 last week.
There are many reasons for this decline, which include a bearish macro environment, a series of network outages, and ties to FTX and Alameda. Accordingly, the bear case for why Solana has the potential to drop further is well documented.
That said, today's move to the upside is also evidence of how upside volatility can materialize on any piece of good news. Given the amount of leverage that remains in the crypto market, any small swing can turn into a big one if leveraged positions get liquidated, which is what we're seeing today.
