Solana (SOL) has seen a strong 30% price bounce from its April 7 low of $95, reaching around $125. While this might seem like a bullish recovery, the rally shows signs of stalling just below the $140 resistance level, raising concerns about the sustainability of this bounce. Traders are being warned to stay cautious as whale exits, distribution by large holders, and dense supply zones flash red flags.

Whale Exits and Distribution Behavior

Despite Solana’s recent recovery, whale exits remain a significant concern. On-chain data revealed that a major whale liquidated 274,188 SOL at an average price of $108, locking in over $11 million in realized losses. This liquidation occurred at a cost basis of $148, meaning the whale is still sitting on substantial losses even after Solana’s price rallied to $125.

This behavior is indicative of continued distribution by smart money. Whales appear to be using price spikes to exit their positions rather than accumulate more tokens. For retail traders, this is a caution signal, especially when combined with a fragile broader market and uncertain on-chain indicators.

The Key $140 Resistance Zone

Solana’s UTXO Realized Price Distribution (URPD), which maps where coins were last transacted and correlates them with price levels, highlights a significant supply concentration at various price levels. Among these, the $140 zone stands out, with over 27.8 million SOL held in this area, representing nearly 5% of the total circulating supply.

This $140 price level is a critical resistance point. Many holders in this range are either near break-even or facing unrealized losses, making them likely candidates for selling if the price approaches this level. If Solana fails to break above $140, a potential whale-driven sell-off could put downward pressure on the price.

Moreover, the $120-$125 range has also seen high concentrations of SOL, with around 38 million SOL clustered there. As the price tests these levels, there is a risk of profit-taking among short-term holders, which could further stall the rally.

Derivatives Market: Aggressive Positioning but Increased Risk

Solana’s recent 7.07% daily upswing has placed it among the top assets in terms of recovery speed. The rally isn’t just driven by spot buying; the derivatives market is also seeing increased activity. Open Interest (OI) surged by 13.89%, reaching $5.23 billion, signaling a fresh wave of leveraged positions entering the market.

While this spike in OI suggests strong market interest, it also introduces fragility. The ongoing whale distribution combined with the elevated open interest creates the potential for a liquidity-driven correction. If Solana fails to maintain its momentum and fall below key support zones, a long squeeze could quickly trigger sharp downward price movements.

What’s Next for Solana?

Solana’s recent bounce has fueled optimism, but it still lacks the conviction needed for a sustained upward move. The price remains trapped below $140, with heavy resistance zones and whale activity creating an uncertain environment for traders.

The market faces a key challenge: Solana needs to reclaim and hold above $140 convincingly to confirm a trend reversal. If it fails to do so, there’s a real risk of downside volatility as liquidation risks rise and a potential long squeeze looms.

In conclusion, while Solana’s rally shows signs of strength, traders should remain cautious and watch closely for confirmation of a breakout above $140. Until then, downside risks remain a serious concern.