Solana (SOL) has been a focal point of traders, with growing concerns around a potential short squeeze as the network’s Long/Short Ratio hits a 30-day low. Despite Solana topping the charts for decentralized exchange (DEX) volumes, traders are heavily betting against the cryptocurrency, creating a rare divergence between market sentiment and the network’s strong on-chain performance.

Short Squeeze Fears Arise as Sentiment Shifts Bearish

As of May 13, 2025, Solana’s Long/Short Ratio dropped sharply to 0.8653, its lowest level in the past month. This indicates that short positions now outnumber long positions by a margin of 53.61% to 46.39%, marking a significant shift in market sentiment. This shift is concerning for Solana as the ratio had previously remained close to equilibrium, with only brief dips below 0.95 over the last month.

The dramatic decline suggests that traders are now more bearish on Solana’s price outlook. Historically, such a sharp divergence in positions has often been a precursor to increased volatility, typically resulting in a short squeeze or further downside movement. The tension between these opposing market forces raises questions about the future price direction of Solana.

Strong Network Activity Contrasts with Bearish Sentiment

Despite the rising number of short positions, Solana’s on-chain activity continues to show strength. Over the past week, Solana has dominated DEX volumes, surpassing even Ethereum (ETH) by more than $6 billion. In the last seven days, Solana has processed $22.4 billion in DEX volume, far outpacing other major networks like Binance Smart Chain (BSC), Base, and Arbitrum.

This surge in volume underscores Solana’s continuing appeal due to its low transaction fees and high throughput, making it an attractive platform for traders, and liquidity providers. However, the growing number of bearish bets suggests that short-term traders may be overlooking the long-term fundamentals of the network.

The stark contrast between Solana’s strong fundamentals and the rising short interest could point to a mispricing of the asset. While traders are becoming increasingly pessimistic, the fundamental strength of Solana’s blockchain ecosystem remains intact, raising questions about whether this short-term sentiment is justified or if it could be a case of traders betting against strength at precisely the wrong time.

Solana’s Price Action and Market Indicators

At the time of writing, Solana’s price is hovering around $174.53, consolidating after a sharp rally earlier in May. Despite the price stagnation, technical indicators show mixed signals. The Relative Strength Index (RSI) is currently at 71.83, signaling that the asset is in overbought territory and may face resistance before continuing its upward trajectory.

However, the Moving Average Convergence Divergence (MACD) remains in bullish territory, with a clear divergence above the signal line, suggesting that upward momentum hasn’t completely faded. These conflicting signals—overbought conditions alongside ongoing bullish momentum—suggest that Solana’s price could experience either a continuation of its rally or a short-term pullback.

Looking Ahead: Key Price Levels for Solana

Solana’s price outlook will largely depend on whether it can maintain its position above key support levels. If Solana can break above the $176 resistance, it may target the $185-$190 range. On the other hand, if the $170 support fails to hold, there is a possibility of a retracement towards the $160 range, which would signal further downward pressure in the short term.

In either case, the growing short interest combined with strong on-chain performance suggests that traders will be closely watching Solana’s next moves, as the potential for a short squeeze looms large. Whether or not Solana can maintain its bullish momentum and rise above its current price levels will be pivotal in determining its short-term price action.

As the situation develops, both long-term investors and short-term traders will need to stay alert to any signs of a market shift, as the combination of high volatility and growing bearish sentiment could lead to significant price swings in the near future.