Through July 2024, the 30-day SOL price volatility had been 38%, rising from a low of 120 USDT to a peak of 168 USDT (increasing by 40%), and then retracing back up to 142 USDT (decreasing 15.5%). According to CoinGlass reporting, the trading contract volume for the solana to usdt pair had been 1.2 billion US dollars and had accounted for 6.7% of the total online crypto derivatives market. Of these open positions, 52% were long positions, 48% were short positions, and the long-short ratio was 1.08, signifying a neutral market sentiment. From a cycle of history perspective, SOL had an annualized return rate of 320% in Q4 2023 due to an ecological boom (e.g., TVL of the Jito staking protocol of more than 1.8 billion US dollars), but the 2022 FTX collapse resulted in a one-day decline of 60% (35 USDT to 14 USDT), which indicates a high risk of volatility.
Technically, SOL/USDT 4-hour RSI stands at 58, which is near the level of 70, indicating the stock is somewhat overbought, and 30-day annualized volatility standard deviation stands at 25%, which is higher than Bitcoin at 16%. If we take the event in March 2024 when the Solana network was down for five hours due to block congestion (resulting in a 12% unexpected drop in SOL prices on the day), the holders need to consider systemic risks. On-chain statistics report that Solana currently has a mean of more than 40 million transactions per day (granted by 400-millisecond block times), but the Gas fee ranges between 0.0001 to 0.001 SOL (approximately 0.014 to 0.14 USDT). High-frequency traders will have to sacrifice 1% to 3% of their earnings as aggregative costs.
Market sentiment is highly correlated with external events: The uncertainty that created a U-turn by the Federal Reserve to leave interest rates between 5.25% and 5.5% in June 2024 created an 8% drop in the total market value of the crypto market, while SOL/USDT lost 9.7% during the same period. However, the total value locked (TVL) in DeFi in the Solana network increased by 22% against the trend to 4.8 billion US dollars. If the hedging is in the form of solana to usdt, the differences in exchange rates have to be accounted for – for example, Binance’s fee for spot order is 0.1%, that of Bitget is 0.08%, and OKX tiered rate can be reduced to 0.05% provided the trading volume of the user has been more than 500,000 USDT in a month. Case reference: In May 2024, when SOL was 152 USDT, an institutional investor hedged 50% of his positions to USDT and held the other half to carry out the liquidity mining of Meme coin BONK (with an annual rate of return of 78%). Eventually, the portfolio rate of return was 21% higher than holding all SOL positions.
On a short-term strategy level, Coinbase’s Q2 2024 report indicates that SOL/USDT liquidity increased by 40% during the Asian trading session (UTC+8), with a median of 0.2 USDT, which is rather appropriate for intraday swing trading. Long-term holders should consider, however, that the Solana Foundation’s inflation in 2024 is set at 6.8%, and the staking annualized yield is approximately 5.2%. If the USDT-based annualized return (say, 3.5% for money market funds) is lower than this spread, then it will be preferable to hold SOL. Risk case: In December 2023, market maker Wintermute was forced to liquidate its 2 million SOL position as its price fell by 18% in a single week alone, which involved a loss of over 36 million USDT.
Operation suggestion: If the current holding cost is below 100 USDT (according to IntoTheBlock data, 56% of SOL addresses are profitable), you can take some profit and set dynamic stop-losses (such as initiating a full conversion when it goes below 130 USDT). If the position is temporary speculation, BitMEX SOLUSDT25% volatility index derivative can be hedged, and the premium cost would be approximately 2.4% to 3.1% of the principal. According to the Solana Core developer announcement, Firedancer upgrade will be live in Q3 2024, presumably to increase network throughput to 1 million TPS, which would be sufficient to drive the SOL price to break through the previous high. It is suggested that one keeps a close eye on testnet progress and market beta coefficient advancements.