Solana Short Thesis

A Brief History of Solana

Solana is one of the worst-looking major crypto assets right now. The chart looks appalling, and its value proposition is crumbling away. The most impactful moment in Solana's history was the launch of President Trump's memecoin, $TRUMP. It would be reasonable to assume that a major uptrend would begin after such an event; however, the opposite occurred. After moving +30%, it rapidly reversed, and the high printed on January 19, 2025, remains untouched to this day.

Since that moment, Solana's price action has been incredibly weak, both against the dollar and against other crypto assets. While it has maintained its long-standing base at $115, we believe that it will soon lose that level and decline into the double digits.

The Fundamentals

• Solana is a layer-one (L1) blockchain. Its value proposition lies in speed—it's one of the fastest blockchains in crypto

• Furthermore, its speed is matched with efficiency. The fees to send assets on the SOL blockchain are much lower than those of its counterparts

• Fast transactions and cheap fees birthed SOL as the home of memecoins

• Since 2023, nearly every significant memecoin has been hosted on the SOL network

• This provided SOL with an incredible value prop in 2023 and 2024, as memecoins were the leading sector in crypto at the time. This led to the price of SOL increasing by nearly 2,300% during that period

• However, memecoins have largely lost their appeal, as traders and investors have transitioned to gold, silver, and AI-related equities

• With the memecoin trade now extinguished, Solana has become an empty chain

The Chart

$115 floor = brick wall

• The $115 level has held for nearly two years now

• It has withstood over 10 attempts, and as logic would dictate, is getting weaker with each new attempt

• Buyers can only sustain this level for so long, and without a narrative or value prop, the likelihood of it holding again is under 10%

Where is the volume capitulation?

• Bottoms are typically made when spot buyers meet spot sellers in size

• In other words, markets bottom on high volume as coins are transferred from weak to strong hands

• We have yet to see any sort of volume capitulation since the $TRUMP debacle, which implies that the bottom has not yet been discovered

• Spot holders who are still holding out hope will likely become forced sellers below $115, which in turn should put downward pressure on leveraged long positions and should ultimately create a liquidation event

• We expect $100 to be the trigger point for such an event; below that, SOL should rapidly decline into the $70–$75 region

Is this short idea overcrowded?

• With the chart looking the way it does, it's logical to assume that the market could be overweight shorts in anticipation of $115 breaking

• However, this does not appear to be the case

• Last week, SOL moved above its December high, yet open interest volatility remained dull

• This is a signal that the market is not shorting and, in fact, is still longing!

• While the number of outstanding long positions is nothing spectacular, the short side is even thinner, which gives us more comfort in taking this trade

Relative strength

• SOL/TOTAL does not look good, and, similar to the SOL/USD pair, appears close to a major breakdown

• SOL/TOTAL3, with TOTAL3 representing the entire crypto market cap excluding BTC and ETH, also looks incredibly weak, signaling that SOL has fewer buyers and/or more downward pressure than its counterparts

• Both of these ratios imply that volatility is coming soon, and with SOL looking the way it does, there is a very high chance that the volatility will be experienced on the downside

The Trade: Short SOL/USD

Entry

We are currently short SOL from $138. This position was entered soon after weakness was discovered above the December high (tweet). Should SOL trade into our entry level, we plan to add more to the existing position.

Invalidation

If SOL is going to break down soon, there is no reason for it to trade above $150 again. Should SOL hold above that price point, we will exit the trade and either re-short from higher or remain on the sidelines.

Target

$75 is our target.