SOL futures open interest has stopped falling over the past two days, holding around $357 million.
It slid from $388 million on the 12th to $356 million on the 17th, an 8% drop in five days. Over the same period, the price fell from $113 to $103. Each day the price moved lower, open interest shrank along with it, as longs that needed to exit continued to close their positions. By the 17th and 18th, open interest had basically leveled off, rising by just $1 million over the two days—almost no movement.
This stabilization alongside shrinking trading volume makes for a contradictory combination. Volume was still $1.2 billion on the 16th, then fell to $700 million on the 17th and just $480 million on the 18th. The consecutive declines point to a quiet market with little new money moving in. But the fact that open interest isn't falling means existing longs are holding on. They're choosing to stay put at these levels, in no rush to close out even as the price churns between $102 and $105.
This combination usually appears in one of two situations. In one, longs have taken such heavy losses that closing now would just lock them in, so they decide to wait for a chance to rebound. In the other, their entry cost was around $100 or lower, and with the price back near that level, they don't feel the need to exit. Either way, the result is the same: existing positions are locked in, waiting for an external catalyst to break the stalemate.
Only when open interest climbs back above $380 million and trading volume rises along with it can we say new money is coming in to absorb the selling. Until then, even if the price rises, it will just be existing capital trading against itself—a rally that probably won't last long.
It slid from $388 million on the 12th to $356 million on the 17th, an 8% drop in five days. Over the same period, the price fell from $113 to $103. Each day the price moved lower, open interest shrank along with it, as longs that needed to exit continued to close their positions. By the 17th and 18th, open interest had basically leveled off, rising by just $1 million over the two days—almost no movement.
This stabilization alongside shrinking trading volume makes for a contradictory combination. Volume was still $1.2 billion on the 16th, then fell to $700 million on the 17th and just $480 million on the 18th. The consecutive declines point to a quiet market with little new money moving in. But the fact that open interest isn't falling means existing longs are holding on. They're choosing to stay put at these levels, in no rush to close out even as the price churns between $102 and $105.
This combination usually appears in one of two situations. In one, longs have taken such heavy losses that closing now would just lock them in, so they decide to wait for a chance to rebound. In the other, their entry cost was around $100 or lower, and with the price back near that level, they don't feel the need to exit. Either way, the result is the same: existing positions are locked in, waiting for an external catalyst to break the stalemate.
Only when open interest climbs back above $380 million and trading volume rises along with it can we say new money is coming in to absorb the selling. Until then, even if the price rises, it will just be existing capital trading against itself—a rally that probably won't last long.