Fading Risk Sentiment Supports Solana Amid Crypto SlumpLast week, Mint Finance published a comparison of Solana with other blockchain networks, focusing on speed, transaction costs, network size, and valuation. We emphasized Solana’s unique position in the decentralized application (dApp) space—particularly in NFTs and meme coin trading—where it has cultivated a loyal user base by offering low fees and fast transaction speeds.
While Solana’s network growth has been notable, its token performance tells a more nuanced story. The token generally trades with a high correlation to broader crypto markets, though it has experienced periods of divergence that have presented attractive spread opportunities.
Solana sits further out on the risk curve compared to BTC and ETH, exhibiting higher volatility. It tends to outperform in risk-on environments, delivering stronger returns during market rallies. However, during risk-off periods, it typically underperforms as investors favor more established and resilient assets like BTC.
Amid the current turbulence in crypto markets, this paper examines Solana’s relative outlook versus BTC and ETH, and outlines how investors can position accordingly using CME Solana and Micro Solana futures.
Recap of Solana Performance and Volatility
After a strong recovery from its 2022 lows following the FTX collapse, Solana began trading closely in line with BTC throughout 2024. Both were among the top-performing crypto assets last year. However, since January, this trend has reversed, with Solana surrendering most of its year-to-date gains.
Data Source: TradingView
Historical volatility across SOL, ETH, and BTC follows a similar trend but varies in magnitude. SOL consistently exhibits the highest volatility, followed by ETH, with BTC being the least volatile. These differences become more pronounced during volatility spikes, while during calmer periods, their volatility levels tend to converge.
The trend in implied volatility (IV) mirrors that of historical volatility, with SOL showing the highest IV and BTC the lowest. Recently, IV has begun to moderate, driven in part by the tariff rollback.
Relative Performance During Risk-On/Risk-Off Periods
During periods of risk-off sentiment—indicated by spikes in the VIX index—Solana typically underperforms, often experiencing the steepest declines among major crypto assets.
Conversely, during market rallies, Solana tends to outperform, often posting the strongest gains by a significant margin.
Technicals Sentiment
Technical indicators suggest a weakening bearish trend for Solana. Although prices have been declining since January, a rising RSI and MACD are signaling that the downtrend may be approaching a turning point. While the broader macro environment remains challenging, the postponement of U.S. tariffs has offered some short-term relief. Nonetheless, continued macro stress may weigh further on prices. The USD 100 level could serve as a potential support, offering psychological significance for the market.
A review of near-term technical indicators reflects a similar outlook, with multiple signals aligning toward a Buy summary. However, the 1D timeframe still shows a Sell signal, indicating that further downside may be possible before a definitive bottom is established.
In contrast, the near-term outlook for ETH remains bearish, with a Sell signal across most timeframes. Any sentiment improvement has yet to materialize for ETH.
Hypothetical Trade Setup
Solana sits further out on the risk curve compared to assets like ETH and BTC, as reflected in its higher implied and historical volatility, as well as its more extreme price movements. It typically experiences the steepest declines during market corrections but also leads gains during bullish periods.
Since the start of the year, Solana’s price has been in steady decline. However, early technical signals suggest the downtrend may be approaching a turning point, though some near-term weakness could persist.
BTC continues to serve as the crypto market’s safe haven. Despite a 20% correction since January, it has significantly outperformed both SOL and ETH. While Solana has been the weakest performer among the three for most of the downturn, it has recently begun to close the gap with ETH as the correction appears to be nearing its end.
With the performance gap between ETH and SOL narrowing as the correction approaches its end, a tactical long SOL / short ETH position may be attractive. If prices continue to rise or consolidate, SOL is likely to outperform ETH due to its higher beta.
Alternatively, for investors expecting further downside in crypto markets, a long BTC / short SOL position could be compelling. This setup aims to capture relative strength in BTC, which tends to benefit from safe haven flows during periods of market stress.
In order to express these views, investors can deploy CME futures which offer compelling margin offsets for inter-market spreads involving cryptocurrencies which can enhance capital efficiency.
Long Micro SOL, Short Micro ETH
Long 1 x Micro SOL April futures: 117.2 x 25 SOL/contract = notional of USD 2,931
Short 19 x Micro ETH April futures: 1554 x 0.1 ETH/contract x 19 = notional of USD 2,952
This trade requires margin of USD 2,185 as of 11/April (USD 1,255 for 1 x MSL and USD 931 for 19 x MET (49/contract)
CME offers 40% margin offset for this trade as of 11/April reducing margin requirements to USD 1,311
A hypothetical trade setup with a 2x reward to risk ratio is described below:
Long Micro BTC, Short Micro SOL
Long 1 x Micro BTC April futures: 81,250 x 0.1 BTC/contract = notional of USD 8,125
Short 3 x Micro SOL April futures: 117.2 x 25 SOL/contract x 3 = notional of USD 8,793
This trade requires margin of USD 5,678 as of 11/April (USD 1,913 for 1 x MBT and USD 3,765 for 3 x MSL (1,255/contract)
CME offers ~25% margin offset for this trade as of 11/April reducing margin requirements to USD 4,261
A hypothetical trade setup with a reward to risk ratio of 1.6x is described below:
To access the standard size contract spreads, investors can use the ratios of 1 x BTC to 6 x SOL and 2 x ETH to 3 x SOL.
MARKET DATA
CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme .
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Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
