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

Over the past 24 hours, Solana liquidation amounts reached as high as $15.6 million. According to Glassnode data, Solana’s 30-day average realized profit and loss ratio has remained below 1 since mid-November, a level typically associated with bear market behavior. Readings below 1 indicate that traders are experiencing more losing trades than winning trades, reflecting deteriorating market sentiment and decreasing liquidity.

Profit and Loss Ratio Falls Below 1: Solana Enters Bear Market Mode

(Source: Glassnode)

Glassnode’s core data reveals the severity of Solana’s current predicament. The 30-day average realized profit and loss ratio has been below 1 since mid-November. This indicator reflects the ratio of realized gains to realized losses on-chain. When this ratio is below 1, it means that the total amount lost by investors when selling exceeds the total gains, a classic bear market signal.

The persistent low profit and loss ratio reflects multiple pressures. First, Solana’s price has retreated from its early-year highs, trapping many high-position investors in losses. Second, market liquidity has tightened, leading to increased price volatility and forcing investors to cut losses at unfavorable levels. Third, the proliferation of leverage trading amplifies this effect; when prices fall and trigger forced liquidations, a chain reaction further depresses prices.

On-chain research group Altcoin Vector describes the current environment as a “complete liquidity reset.” Historically, this pattern marks the beginning of a new liquidity cycle and signals a market bottom. Analysts suggest that if the structure resembles that of April, liquidity could start to recover in about four weeks, with new growth momentum emerging in early January. This judgment is based on historical cycle analysis; Solana’s liquidity crises typically last 4 to 6 weeks before entering a rebound phase.

However, a “bottoming out” does not mean an immediate rebound. Before liquidity fully recovers, the market may continue to oscillate at low levels, forming a so-called “base-building” phase. Investors should patiently wait for clear reversal signals rather than blindly bottom-fish.

Liquidation Wave and High Leverage Risks Amplify Volatility

In the past 24 hours, the total crypto market liquidation amount reached $432 million, with Solana accounting for $15.6 million, making it the third-largest asset liquidated after Bitcoin and Ethereum. Although this figure is smaller than the two giants, considering Solana’s market cap, this liquidation proportion is quite significant.

The liquidation wave is driven by the prevalence of high-leverage trading. Solana’s high performance and low transaction fees have attracted many speculators, with many traders using 5x to 20x leverage for long and short positions. When prices fluctuate sharply, these high-leverage positions are quickly forced to liquidate, and automatic liquidations on exchanges further exacerbate price swings, creating a “liquidation spiral.” Notably, despite Solana’s price rising 3.2% during the day, the large liquidation amount indicates extremely high market volatility, with both longs and shorts suffering losses.

Three Major Pressures Facing Solana Currently

Liquidity Exhaustion: Profit and loss ratio remains below 1, market lacks new buying interest, price discovery mechanism fails

Leverage Trading Surge: High-leverage positions frequently trigger liquidations during volatility, worsening market instability

Confidence Crisis Spreading: Ongoing price weakness and negative data erode long-term holders’ confidence

In the short term, declining profitability, weakening liquidity, and high leverage make Solana susceptible to intense fluctuations. Any macroeconomic uncertainty or systemic crypto market risks could trigger further sell-offs.

Structural Outflows from ETFs and Exchanges as Hedging

Despite the pressures, Solana is not isolated. Continuous capital withdrawals from centralized exchanges lead to a steady decline in available supply, while demand from ETF buyers continues to grow. According to SoSoValue data, this week so far, spot Solana ETFs recorded a net inflow of $17.72 million, nearly matching last week’s $20.3 million.

This structural support is significant. Outflows from exchanges indicate investors are withdrawing Solana to personal wallets, often a sign of long-term holding. When available supply decreases, downward pressure on prices diminishes even if demand remains unchanged. The ongoing ETF inflows provide institutional-level demand, which tends to be more stable and less affected by short-term volatility.

Pye Finance secured $5 million in seed funding, adding confidence to the Solana ecosystem. The round was led by Variant and Coinbase Ventures, with participation from Solana Labs, Nascent, Gemini, and others. Pye is building a bond market for validators and stakers on Solana, allowing them to withdraw and retain staked tokens while earning rewards. This innovation helps unlock locked SOL liquidity and improves ecosystem capital efficiency.

Analysts suggest that Solana’s medium- to long-term outlook remains somewhat optimistic, especially if macroeconomic uncertainties diminish and market liquidity recovers. However, at this stage, volatility is expected to persist, and investors should exercise caution.