Solana (SOL) has tumbled to approximately $126 in early trading today, marking a sharp 7% decline in 24 hours as a broader cryptocurrency market selloff intensifies. The downturn comes as Bitcoin crashed below $86,000, dragging the entire digital asset market into the red and erasing hundreds of millions of dollars in leveraged positions.
Bitcoin Leads Market Collapse
The cryptocurrency market opened December with severe losses, with Bitcoin plummeting to $85,500—a 5% drop that has sent shockwaves through the industry. The total cryptocurrency market capitalization fell approximately 5% to around $3.04 trillion as investors fled risk assets amid mounting macroeconomic concerns.
Market Liquidation Alert
The selloff triggered massive liquidations across derivatives markets, with over $656 million in positions wiped out—$564.3 million of which were long positions betting on price increases.
Ethereum followed suit, sliding below $2,850 with a 6% decline, while major altcoins including BNB, XRP, and Solana all posted significant losses.
Bank of Japan Rate Hike Fears Spark Panic
The immediate catalyst for today's crash appears to be mounting expectations of an interest rate hike by the Bank of Japan at its December 18-19 meeting. This potential policy shift has amplified concerns about the unwinding of the yen carry trade—a popular strategy where investors borrow yen at low rates to invest in higher-yielding assets like cryptocurrencies.
Bitcoin dumped because BOJ put a December rate hike in play.
Arthur Hayes, co-founder of BitMEX, noted this correlation in a social media post. A stronger yen resulting from higher interest rates makes carry trades more expensive, forcing investors to unwind positions and sell risk assets—a scenario that previously triggered a 20% Bitcoin crash to $49,000 in August 2024.
Solana's Perfect Storm
While the broader market weakness explains much of Solana's decline, the network has faced additional headwinds throughout November that have compounded selling pressure. The cryptocurrency has been in a sustained downtrend since early November, falling from levels near $186 and an October high just under $200. This represents a significant retracement from Solana's January 2025 all-time high of approximately $295.
Security Breach Compounds Concerns
A major security incident on November 27 added fuel to the fire. South Korean cryptocurrency exchange Upbit—one of the largest in the world—suffered a $36.8 million hack targeting Solana-based assets. The breach involved unauthorized withdrawals of SOL, USDC, and over 20 other Solana ecosystem tokens including BONK, JUP, RAY, ORCA, RENDER, and PYTH.
Authorities suspect North Korea's state-sponsored Lazarus Group orchestrated the attack by compromising administrator accounts. The incident forced Upbit to suspend all deposit and withdrawal services, temporarily reducing liquidity for Solana trading. The exchange announced today that it will begin a phased resumption of services starting at 1:00 PM KST, though full restoration will take time. Importantly, Upbit has pledged to reimburse all affected users from corporate reserves, and the Solana network itself experienced no technical issues during the incident.
Network Metrics Tell Mixed Story
Despite the price decline, on-chain data reveals surprising strength in Solana's fundamentals. The network processed approximately 1.84 billion transactions over the past 30 days—a 16% increase that outpaced Ethereum, BNB Chain, Base, and Arbitrum combined. Active addresses grew about 13% during the same period, reaching over 63.1 million users.
Perhaps most impressively, Solana has maintained 662 consecutive days without a network outage, the longest uninterrupted runtime in its history. This operational stability stands in stark contrast to the frequent downtime that plagued the network in previous years.
However, other metrics paint a less rosy picture. Total Value Locked (TVL) in Solana's DeFi platforms dropped 20% month-to-date, while transaction fees fell 16% and active addresses declined 6% over the past week. These figures suggest reduced economic activity despite high transaction throughput.
ETF Flows Show Institutional Uncertainty
The recent launch of spot Solana ETFs in the United States has produced mixed results. While the products attracted strong initial demand—with Bitwise's BSOL ETF alone drawing nearly $199 million in the first week—the momentum has faltered. On November 26, Solana ETFs recorded their first net outflow day with $8.2 million leaving the funds. This marked a reversal of the positive flow trend that had brought cumulative inflows to over $419 million in November.
However, the pullback appears modest compared to the massive outflows from Bitcoin ETFs, which saw $3.57 billion exit in November. The institutional interest in Solana, evidenced by these ETF launches and ongoing staking activity (approximately 67% of circulating SOL is staked), suggests long-term conviction remains intact despite short-term price volatility.
Technical Analysis Points to Further Downside Risk
From a technical perspective, Solana's chart structure has deteriorated significantly. The cryptocurrency is trading within a descending triangle pattern—typically viewed as a bearish continuation setup. Analysts warn that a break below the current support zone around $120-$126 could trigger a decline toward $100 or even lower.
The Relative Strength Index (RSI) has fallen below 20 on intraday charts, indicating severely oversold conditions that often precede relief bounces. However, the Moving Average Convergence Divergence (MACD) shows bearish momentum, suggesting the path of least resistance remains downward in the near term. Resistance levels are forming around $140-$150, with more substantial barriers at $170. Bulls would need to reclaim these levels convincingly to invalidate the bearish thesis.
Looking Ahead: Recovery or Further Decline?
Market participants are sharply divided on Solana's near-term prospects. Bears point to weakening on-chain metrics, technical breakdown patterns, and the broader risk-off environment as evidence that further losses lie ahead. The potential for a Bank of Japan rate hike continues to loom as a macro headwind that could pressure all risk assets.
However, bulls argue that Solana's fundamental strengths—high throughput, low fees, growing stablecoin supply (up 10% in a week), and expanding real-world asset tokenization—position the network well for long-term growth. The launch of upcoming network upgrades like Firedancer, which promises to dramatically increase transaction capacity, could serve as a catalyst for renewed investor interest.
Institutional accumulation continues despite price weakness. Corporate holders like Upexi are reportedly raising capital specifically to acquire more SOL, viewing current prices as an attractive entry point. Additionally, approximately 67% of circulating SOL remains staked, with retail delegators actually increasing their positions during the recent 30% drawdown—a sign of conviction among long-term holders.
Market Context: December Typically Weak for Crypto
Today's selloff fits a broader seasonal pattern. December has historically been a mixed month for Bitcoin, with a long-term average return of 8.42% but a median return of just 1.69%. The last four years have produced three negative Decembers, suggesting seasonal headwinds. November's 17% decline in Bitcoin set a cautious tone entering December, and institutional ETF flows have been inconsistent since July. Analysts note that a sustained return to positive ETF inflows—particularly daily additions of $200-$300 million—would likely be necessary to signal the start of a meaningful recovery.
The Bottom Line
Solana's drop to $126 reflects a confluence of factors: a market-wide flight from risk assets driven by Bank of Japan rate hike fears, lingering concerns from the Upbit security breach, weakening short-term on-chain metrics, and technical breakdown below key support levels. However, the network's fundamental performance remains robust, with record transaction volumes, unprecedented uptime, and growing institutional interest through ETF products.
The disconnect between price action and network usage suggests that current levels may present opportunity for long-term investors, though near-term volatility is likely to persist. As Upbit resumes services and market participants assess the Bank of Japan's next move, Solana's path forward will largely depend on whether broader cryptocurrency market sentiment can stabilize. For now, the $120-$130 support zone represents a critical battleground that will determine whether this is a capitulation low or merely another step in a deeper correction.