TLDR
- Solana crashed to $204.17 on Tuesday before recovering above $209.50 as institutional investors bought the dip
- Retail leveraged traders were liquidated during the sell-off while large holders accumulated positions
- Government shutdown fears triggered the decline but stock markets reversed losses with DOW hitting new record
- SEC withdrawal requests for altcoin ETF applications could accelerate approval process in October
- Traders maintain focus on October 10 deadline for SEC decision on Solana spot ETF applications
Solana experienced a sharp downturn on Tuesday as political tensions in Washington spooked financial markets. The cryptocurrency fell to $204.17 before staging a quick recovery.
The decline came after Democrats and Republicans failed to reach an agreement on government funding. Markets initially reacted negatively to the possibility of a shutdown starting October 1.
Traditional stock markets reversed early losses by the close of trading. The DOW Jones posted another record high while the S&P 500, Nasdaq and Russell 2000 all finished positive.
Bitcoin dropped to $112,656 during the sell-off before bouncing back to $114,400. The recovery in traditional markets helped stabilize cryptocurrency prices across the board.
Solana closed the day down 1.38% but regained its median weekly range. The token traded above $209.50 after recovering from intraday lows.
Retail Traders Liquidated as Big Money Steps In
On-chain data from Hyblock shows retail traders took the heaviest losses during the flash crash. Leveraged long positions opened near Monday’s price highs were forced to close.
Large wallet holders moved in the opposite direction. Entities with holdings between 1 million and 10 million in cumulative volume delta accumulated Solana during the price drop.
The liquidations created negative funding rates that attracted new buyers. Professional and retail traders opened fresh spot and margin positions after the initial panic subsided.
Data from Velo confirms the pattern of institutional accumulation during weakness. This buying behavior suggests larger investors view current price levels as attractive entry points.
ETF Approval Timeline Stays in Focus
The SEC recently requested asset managers withdraw altcoin ETF applications including Solana. The unexpected move initially raised concerns among market participants.
Bloomberg ETF analyst Eric Balchunas believes October could bring multiple approvals. He suggested the withdrawal requests might be part of a process to streamline decisions.
The SEC has already approved spot ETFs for Ethereum and other major cryptocurrencies. Several altcoins including Dogecoin and XRP have received their first spot investment vehicles.
October 10 marks the SEC deadline for decisions on pending Solana ETF applications. Traders continue watching this date as a potential catalyst despite recent volatility.
Bitcoin investors remain focused on anticipated Federal Reserve interest rate cuts. Expectations of a more crypto-friendly Fed chair under a Trump administration add to positive sentiment.
Technical Outlook Points to Key Resistance
Solana currently trades around $209.50 with technical analysis identifying $270 as the next major resistance level. The cryptocurrency has maintained support along its upward trend line.
The price structure resembles Ethereum’s pattern before its breakout above $4,000. Growing institutional interest through potential ETF approvals could provide momentum for a similar move.
Corporate treasuries continue exploring cryptocurrency allocations. This institutional demand could support higher prices if ETF approvals materialize in October.
Solana reclaimed its weekly median range after the flash crash. The quick recovery demonstrates underlying strength despite temporary government shutdown concerns.
