Solana (SOL) has entered a period of intense market scrutiny following the liquidation of billions of dollars worth of tokens from the FTX bankruptcy estate. The ripple effects have sent shockwaves through the cryptocurrency’s price action, on-chain activity, and investor sentiment. With a scheduled unlock of 11.2 million SOL—valued between $1.57 billion and $2.03 billion—market participants are grappling with questions about supply pressure, long-term viability, and whether the current dip presents a strategic buying opportunity.
This article dives deep into the mechanics behind FTX’s Solana liquidations, analyzes the resulting on-chain data collapse, and evaluates what’s next for one of crypto’s most prominent Layer 1 blockchains.
The $2 Billion FTX Unlock: Market Overhang or Controlled Release?
On March 1, 2025, 11.2 million SOL tokens entered circulation as part of the FTX bankruptcy estate's asset liquidation process. Unlike typical vesting schedules tied to project development milestones, these tokens were released under court supervision to repay creditors. Given FTX’s massive holdings acquired during Solana’s earlier funding rounds, this unlock represented one of the largest single token releases in recent crypto history.
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The timing couldn’t have been more sensitive. Solana had already begun correcting from its February peak of $224, and traders were closely monitoring whale movements. The prospect of immediate sell-offs sparked fear across the market, contributing to a sharp decline in price and confidence.
While not all unlocked tokens were dumped immediately, large transfers to exchanges—including a notable 2.243 million SOL sent to Coinbase on February 28—fueled speculation of coordinated selling. Such movements often precede exchange-based liquidations, especially when tied to institutional counterparties.
Price Reaction: From $224 Highs to Sub-$140 Support Test
Solana’s price trajectory since mid-February reflects growing bearish momentum. After peaking at $224, SOL dropped over 30%, briefly touching $140 amid rising panic. Key technical support levels around $168 and $155 were decisively broken, signaling a shift in market structure.
Technical analysts point to increasing volume during down days and weakening on-chain fundamentals as signs that short-term sentiment remains fragile. While some buyers have stepped in near the $140–$130 range, sustained recovery will require both reduced selling pressure and renewed network engagement.
Despite the downturn, notable figures in the crypto space remain bullish. Arthur Cheong, founder of DeFiance Capital, publicly confirmed receiving a portion of the unlocked SOL via an over-the-counter (OTC) deal facilitated by Galaxy Digital at $64 per token. In a widely circulated social media post, he stated:
“Not selling a single one of them. I think it will be substantially higher in 3 months.”
Such endorsements from seasoned investors suggest that while retail sentiment may be wavering, institutional confidence in Solana’s long-term potential persists.
On-Chain Health in Decline: Transfer Volume and TVL Drop Sharply
Beyond price fluctuations, Solana’s underlying network activity paints a concerning picture. According to Glassnode data, daily transfer volume has plummeted approximately 99% since November 2024—from $1.99 billion to just $14.57 million by February 2025.
This dramatic contraction indicates significantly reduced user engagement, potentially driven by:
- Lower retail participation
- Reduced yield farming incentives
- Migration of capital to competing ecosystems like Ethereum L2s or Bitcoin Layer 1 innovations
Total Value Locked (TVL) in Solana’s DeFi ecosystem has also taken a hit, falling below $9 billion for the first time since late 2024—a nearly 40% drop month-over-month. DeFiLlama data shows over $500 million in liquidity has migrated to alternative chains, weakening Solana’s competitive edge in decentralized finance.
These trends raise valid concerns about ecosystem resilience during bearish cycles and highlight the platform’s dependence on speculative activity during bull runs.
Institutional Buyers Step In: Galaxy Digital’s Strategic Acquisition
While fears of uncontrolled dumping dominate headlines, the reality is more nuanced. Much of the unlocked SOL was acquired through structured OTC deals rather than open-market sales.
Galaxy Digital, led by Mike Novogratz, emerged as the largest buyer, securing 25.5 million SOL at an average price of $64. At current prices near $143, this positions Galaxy with a substantial unrealized gain—yet there’s little evidence of aggressive selling so far.
Such institutional involvement suggests a calculated approach to asset redistribution rather than panic-driven liquidation. These entities often hold strategic positions for months or years, especially when acquiring discounted assets during distressed sales.
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Still, the shadow of future unlocks looms large. With legal fees in the FTX case surpassing $1 billion, liquidators face ongoing pressure to convert remaining assets into cash. Additional SOL sales cannot be ruled out in Q2 2025.
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Frequently Asked Questions (FAQ)
Q: Why did FTX sell so much Solana?
A: FTX held large amounts of SOL from early investments. As part of its bankruptcy proceedings, the estate is required to liquidate assets to repay creditors, leading to the release of millions of SOL tokens.
Q: Did the FTX liquidation cause Solana’s price drop?
A: It was a major contributing factor. The combination of the $2 billion unlock and large transfers to exchanges amplified selling pressure and weakened market sentiment, accelerating the decline from $224 to $140.
Q: Is Solana’s ecosystem still active despite lower TVL?
A: While activity has cooled, core protocols remain operational. However, the 99% drop in transfer volume and capital outflows indicate reduced engagement that must be reversed for sustainable recovery.
Q: Are institutional buyers holding or selling their SOL?
A: Early signals suggest holding. Major players like Galaxy Digital purchased large volumes at discounts but haven’t shown signs of dumping. Some, like Arthur Cheong, have explicitly stated they’re not selling.
Q: Could Solana rebound if selling pressure eases?
A: Yes. If FTX-related sales stabilize and macro conditions improve, renewed interest in Solana’s high-speed blockchain could drive capital back into its DeFi and NFT sectors.
Q: What is the next key support level for SOL?
A: Analysts identify the $125–$130 range as the next critical support zone. A break below could lead to further downside; a bounce could signal stabilization.
Looking Ahead: Trap or Opportunity?
Solana now stands at a crossroads. Short-term pain from forced liquidations contrasts with long-term fundamentals still intact—high throughput, low fees, and a vibrant developer community.
The key question isn’t just about price—it’s about trust. Can the network retain users and developers during periods of external stress? Can it diversify beyond speculative trading into real utility?
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For forward-looking investors, the current environment may represent a rare chance to accumulate SOL at a discount—especially given strong institutional conviction. But caution remains warranted until on-chain health improves and selling pressure from bankruptcy estates subsides.
In the volatile world of crypto, every crisis contains the seed of opportunity. Whether Solana nurtures that seed will determine its place in the next chapter of blockchain evolution.