Solana DeFi takes over liquidations during recent SOL market slump

Solana (SOL) had most of its liquidations on-chain after the weekend’s market slump. On-chain liquidations were over 79% higher compared to centralized exchange activity. 

The Solana chain showed it is capable of carrying high-grade financial transactions, after handling most of the liquidations during the recent SOL slump. Over the weekend, SOL dipped further away from the $200 milestone, sinking to $182.60.

The market downturn wiped out long positions for all assets. SOL had $37.4M in on-chain liquidations, with another $20.9M on centralized exchanges. On Monday, liquidations continued, with SOL seeing $29.7M wiped out from centralized markets. As Cryptopolitan previously reported, SOL derivative activity switched to on-chain trading.

The biggest driver of SOL derivative trading is the direct access from the Phantom wallet. Other perpetual futures markets also show increased interest in SOL. 

SOL activity shifts to decentralized protocols

Following the latest round of liquidations, SOL open interest on major exchanges fell by over 7%. Binance remains the top market for centralized exchanges on Solana. 

Drift Protocol is currently the biggest on-chain perpetual futures exchange for SOL, with over $1.19B in total value locked. SOL open interest also reached a new peak on Hyperliquid, with over $1.2B in open positions. SOL is one of the smaller markets on Hyperliquid, but it turned responsive as the asset returned close to $200. 

Open interest is back to $4.98B, as traders started rebuilding their long positions. However, long positions are rebuilding to levels as low as $175, while short positions stop at just above $200. 

As a result of growing on-chain activity, Jupiter and Jito are back among the top 10 fee producer apps. Solana fees are also back to between $1M and $2M daily, despite only having 2.3M daily active users. 

In the past week, the Solana ecosystem also saw inflows from other chains, with nearly half the inputs coming from Ethereum. Solana stablecoins are back above $12B, with over $10B in liquidity locked in decentralized protocols. 

Solana DeFi is still relatively small, though Kamino Lend has been growing actively, with over $3B in value locked. Solana’s on-chain activity is slowly shifting to multiple forms of DeFi, going beyond meme tokens. 

Solana whales turn to short positions

Following the latest liquidations, Hyperliquid whales rebuilt short positions on Solana. As of August 18, 59 whales were long on SOL, while 70 shorted the asset. 

The White Whale is one of the high-profile traders with a bullish SOL outlook. Currently, the trader holds a 20X leveraged long on SOL, with a notional value of $79M. The position carries a $1.22M unrealized loss, with a liquidation price at $154.59. 

The White Whale was also among the first to call for rebuilding long positions, expecting a market recovery.

SOL sentiment is generally more cautious and bearish for both retail and smart money. SOL was one of the weakest assets in the new week, where all blue chips sank. However, the expectations of high-risk traders are for SOL breaking out with a ‘hate rally’. 

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