Solana experiences explosive price volatility, and the demand for derivatives sometimes surpasses Ethereum.

Recent developments show that the level of interest in Solana is still less vibrant compared to the other two "giants", but the balance seems to be starting to change.

In the past week, SOL experienced severe volatility: the price rebounded strongly above the 200 USD mark, reaching a peak of 209 USD on Thursday, then quickly plummeted over 20%, falling back to 187 USD in just two days.

Market data shows that this unusual volatility is closely related to derivative activities, which have unexpectedly come back to life. Notably, the trading volume of Solana's (perpetual futures) in the past 24 hours even surpassed that of Ethereum.

The trading volume of Solana perpetual futures | Source: DeFiLlamaThis is particularly noteworthy as previously, the derivatives market of Solana was quite quiet, often lagging behind Ethereum – which has always been the focal point for investors. The strong rise of derivative products related to Solana not only reflects a new wave of interest from the market but may also signal that a "liquidity rotation" is taking place amidst the booming altcoin season. A series of other signals are also reinforcing this observation.

DEX trading volume on Solana explodes, reflecting network activity

In the first week of August, liquidity on Solana's DEX exchanges was quite sluggish, with a peak of just over 4 billion USD on August 1 and a low around 2 billion USD. However, by Thursday, the picture changed dramatically as trading volume unexpectedly surged, reaching 7 billion USD.

DEX volume of Solana | Source: DeFiLlamaData from LunarCrush shows that Solana also recorded a slight progress in market share. The dominance rate of SOL increased from 2.37% on Tuesday to 2.69% on Thursday, coinciding with a wave of active trading on both DEX and the derivatives market. However, shortly after that, the dominance level decreased slightly, reflecting the instability of cash flow.

This development coincides with price fluctuations over the week. SOL has maintained an upward trend since the beginning of August, but most of the breakout occurred in the last two days, when the price surged 19% from the low on Tuesday to the peak for the week on Thursday. Notably, right after this acceleration, SOL faced a deep correction due to excessive demand for derivatives, creating many "traps" on the upward journey.

Price Movement of SOL | Source: TradingView## SOL witnessed massive liquidations while spot capital flow remains weak.

The price surge of Solana (SOL) was strongly supported when the funding rate soared to its highest level in 6 months on Thursday. At the same time, trading volume also exploded, reaching a half-year peak, but accompanied by a wave of fierce liquidations.

In that, long positions were wiped out by more than 55 million USD - the second highest figure in just two weeks. Conversely, short liquidations on the same day also reached 17 million USD. These figures indicate that the market is leaning towards short-term trading, while demand in the spot market remains quite lackluster.

Liquidation of Solana | Source: CoinglassIn just the last 3 days, Solana has seen a capital outflow from spot reaching up to 256 million USD, becoming the main reason that hinders the increase and pulls the price into a correction phase.

In summary, this decline mainly stems from significant selling pressure in the spot market, likely as a result of the strategy of "hunting" leveraged positions. This reflects that SOL is not yet truly ready for a major breakout. However, the current strong volatility is still clear evidence that Solana is on the radar of investors.

In other words, if the "altcoin season" continues to heat up, SOL could completely become the focal point for attracting stronger liquidity inflows in the near future.

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