Solana's profit and loss ratio fell below 1! The 1560 liquidation wave is coming, and the bear market signal is flashing

In the past 24 hours, Solana liquidations have reached a whopping $1560K. According to Glassnode data, Solana’s 30-day average real profit and loss ratio has been consistently below 1 since mid-November, a level often associated with bear market behavior. A reading below 1 indicates that traders are losing more than they are profiting, indicating deteriorating market sentiment and reduced liquidity.

P&L Ratio Falls Below 1: Solana Stuck in Bear Market Pattern

! Solana Liquidity Index

(Source: Glassnode)

Glassnode’s core data sheds light on the severity of Solana’s current woes. The 30-day average actual P&L ratio has been below 1 since mid-November, a metric that reflects the ratio of realized profits to realized losses in on-chain transactions. When this ratio is below 1, it means that the total amount of money lost by investors when selling exceeded the total amount of profit, which is a typical bear market signal.

The continued downturn in the break-loss ratio reflects multiple pressures. First, the price of Solana fell from its year-to-date high, and a large number of investors who entered the market at high levels fell into losses. Secondly, the tightening of market liquidity has intensified price volatility, forcing investors to stop losses at unfavorable prices. Thirdly, the popularity of leveraged trading amplifies this effect, with a ripple effect that further pushes prices down when price declines trigger forced liquidation.

On-chain research group Altcoin Vector describes the current environment as a “full liquidity reset.” This pattern has historically marked the beginning of a new liquidity cycle and signaled a market bottom. Analysts note that if the structure is similar to the April arrangement, liquidity may begin to recover in about 4 weeks, and new growth momentum may emerge in early January. This judgment is based on historical cycle analysis, and Solana’s liquidity crises in the past usually lasted for 4 to 6 weeks before entering a rebound phase.

However, a “bottom” does not imply an immediate rebound. Before liquidity is fully restored, the market may continue to fluctuate at low levels, forming the so-called “bottoming” stage. Investors need to wait patiently for a clear reversal signal rather than blindly buying the dip.

Liquidation Wave and High Leverage Risk Amplification Fluctuations

In the past 24 hours, the overall crypto market has liquidated up to $4.32M, with Solana accounting for $1560K, making it the third largest liquidation asset after Bitcoin and Ethereum. Although this figure is less than the two leading companies, considering the size of Solana’s market capitalization, this liquidation ratio is considerable.

Behind the liquidation wave is the prevalence of high-leverage trading. Solana has attracted a large number of speculators due to its high performance and low fees, with many traders using 5x to 20x leverage for long-short games. When prices fluctuate violently, these highly leveraged positions quickly hit the liquidation line, and the exchange’s automatic liquidation further exacerbates price volatility, forming a “liquidation spiral.” Notably, despite a 3.2% increase in Solana’s price on the day, the liquidation amount remained substantial, indicating extreme market volatility, with both long and short sides suffering losses.

Solana’s Current Triple Pressure

Liquidity Depletion: The profit-loss ratio continues to be below 1, the market lacks new bids, and the price discovery mechanism fails

Proliferation of Leverage Trading: High-leverage positions frequently trigger liquidations amidst volatility, exacerbating market instability

Confidence Crisis Sprawling: Ongoing price weakness and negative data erode long-term holder confidence

In the short term, declining profitability, weakened liquidity, and high leverage make Solana vulnerable to sharp volatility. Any macroeconomic uncertainty or systemic risks in the crypto market could trigger further sell-offs.

Structural hedging between ETFs and exchange outflows

Despite the pressure, Solana is not alone. The ongoing withdrawal of funds from centralized exchanges has led to a steady decline in the available supply, while demand from ETF buyers has continued to grow. According to SoSoValue data, spot Solana ETFs have recorded a net inflow of $1772K so far this week, almost unmatched last week’s $2030K.

This structural support is of great significance. Exchange outflows mean investors are withdrawing Solana from exchanges to personal wallets, which is often a signal of long-term holding. When the saleable supply decreases, downward pressure on prices decreases even if demand remains constant. Continued inflows into ETFs provide institutional-grade demand, which is generally more stable and less susceptible to short-term fluctuations.

Pye Finance’s $500K seed round also adds confidence to the Solana ecosystem. This round of financing was led by Variant and Coinbase Ventures, with participation from Solana Labs, Nascent, Gemini, and others. Pye is building a bond marketplace for validators and stakers on Solana, allowing validators to withdraw and retain their staked money and offer rewards. This innovation helps unlock locked SOL liquidity and improve ecological fund efficiency.

Analysts say Solana’s medium- to long-term outlook remains slightly optimistic, especially as macroeconomic uncertainty dissolves and market liquidity restores. However, at this stage, volatility will continue, and investors need to be cautious.