Engagement of Solana Whales in Deribit’s Bearish Options Amid Price Decline
Overview
SOL put options accounted for most of the block trades that crossed the tape on Deribit last week.
Key Highlights:
- SOL block trades represented nearly 25% of the total Solana options activity on Deribit.
- Most of the block trades involved put options, which serve as downside protection amid declining prices.
- The decline in on-chain activity and the upcoming token unlock are putting pressure on SOL’s price.
Recent Trends
Deribit’s options market for Solana’s SOL token has seen increased activity, particularly with whales participating in bearish trades as the token value drops before a significant unlocking event.
Last week, Solana block trades reached $32.39 million in notional value, making up almost 25% of the total options activity worth $130.74 million. The rest was attributed to screen trades, marking a record level of block trades in total activity.
Understanding Block Trades
A block trade in options signifies a substantial, privately negotiated transaction involving multiple contracts between two entities. This type of trading typically occurs off-market and then gets booked on exchanges, minimizing market impact.
Options provide buyers the right but not the obligation to buy or sell the underlying asset (in this case, SOL) at a predetermined price within a specific timeframe. A call option gives the right to buy, whereas a put option gives the right to sell.
Last week’s surge in SOL block trades was driven mostly by put options, utilized by traders to hedge against potential declines in price.
Gregor Magadini, Director of Derivatives at Amberdata, mentioned:
“Nearly 80% of the block-trade volume was concentrated in put contracts, compared to just 40% for BTC and 37.5% for ETH in the same period.”
Conclusion
The demand for put options is growing as SOL has witnessed a 46% price decline to approximately $160 over the last five weeks. Activity within Solana peaked when it became a popular home for memecoin traders last year.
Now, with anticipated unlock events and dramatically decreased transaction volumes, the market outlook for SOL seems ominous.
Upcoming Unlock
Solana will experience a significant token unlock on March 1, releasing 11.2 million SOL, valued at roughly $2.07 billion, equivalent to 2.29% of its total supply. This event could lead to notable market fluctuations.
“A significant portion of the unlock results from the FTX estate and sales from the foundation,” said Lin Chen, Deribit’s Asia head.
Expectations are that the large unlock might prompt increased market activity as it constitutes 59% of SOL’s daily spot trading volume. Thus, it’s reasonable to project substantial hedging activity in the put options market leading up to the event.
