Shrinking Liquidity Puts Solana On Unsteady Ground As Profitability Deteriorates: Glassnode

What Happened

Key Takeaways:

Despite the pressure, Solana isn’t without support. Persistent withdrawals from centralized exchanges have steadily reduced available supply, while demand from ETF buyers continues to build.

Spot Solana ETFs recorded $17.72 million in net inflows so far this week, nearly matching last week’s $20.30 million, according to SoSoValue.

Market Context

The Solana network’s foundation is weakening as liquidity thins and profitability drops, according to on-chain data.

Solana is undergoing a “full liquidity reset,” with realized losses exceeding profits and liquidity falling.

Exchange outflows and steady ETF inflows are providing structural support despite thinning liquidity.

Analysts see potential recovery by early January, but near-term volatility remains high.

According to Glassnode, Solana’s 30-day average realized profit-to-loss ratio has remained below 1 since mid-November, a level typically associated with bear-market behavior.

A reading under 1 means traders are realizing losses more often than profits, signalling deteriorating sentiment and reduced liquidity.

Analysts Say Solana Entering “Full Liquidity Reset”

On-chain research group Altcoin Vector described the current environment as a “full liquidity reset,” a pattern that has historically marked the beginning of new liquidity cycles and preceded market bottoms.

If the structure mirrors April’s setup, analysts said liquidity could begin to recover in roughly four weeks, pointing to early January for potential renewed momentum.

Still, the broader environment remains fragile. Elevated leverage across crypto markets has amplified volatility, with CoinGlass reporting $432 million in liquidations over the past 24 hours.

Analysts say the mid- to long-term outlook for Solana remains slightly constructive, especially if macro uncertainty clears and liquidity returns to the market.

However, in the near term, shrinking profitability, thinning liquidity, and heavy leverage leave the asset vulnerable to sharp swings.

As reported, Pye Finance has revealed a $5 million seed round led by some of the major players in the space. The goal is to turn billions in locked SOL stakes into an active yield market.

Pye says that it’s building bond markets for validators and stakers on Solana (SOL). The platform enables validators to draw and keep stake. They can offer rewards across more than a thousand validators.

Fed Liquidity Boost Could Send Bitcoin “Sharply Higher”

As reported, Bitcoin’s climb above $92,000 has stirred fresh optimism among market watchers who now believe this week’s Federal Reserve meeting could set off a far bigger rally.

Analysts at the London Crypto Club say a liquidity boost from the Fed on Wednesday may act as a powerful catalyst, potentially driving the world’s largest cryptocurrency “sharply higher.”

In their latest note, David Brickell and Chris Mills argue that the central bank is poised to deliver a “dovish surprise,” forecasting that policymakers will inject liquidity through a creative bond-buying mechanism rather than explicit quantitative easing.

Why It Matters

Solana accounted for $15.6 million of that, making it the third-most liquidated asset behind Bitcoin and Ethereum, as the token climbed 3.2% on the day, per CoinGecko.

Variant and Coinbase Ventures led this round, with participation from Solana Labs, Nascent, Gemini, and others, according to the press release.

Details

“We’re moving into a continued rate-cutting cycle accompanied by balance sheet expansion as the Fed effectively turns on the money printers to monetise the deficit,” they wrote.