Declining Liquidity Creates Instability for Solana Amid Decreasing Profitability, According to Glassnode

The foundation of the Solana network is deteriorating as liquidity decreases and profitability declines, based on on-chain data.

Key Takeaways:

• Solana is experiencing a “complete liquidity reset,” with realized losses surpassing profits and liquidity diminishing.
• Outflows from exchanges and consistent ETF inflows are providing structural support despite the reduction in liquidity.
• Analysts anticipate a possible recovery by early January, although short-term volatility remains elevated.

As reported by Glassnode, Solana’s 30-day average realized profit-to-loss ratio has stayed below 1 since mid-November, a threshold typically linked to bear-market conditions.

A ratio below 1 indicates that traders are incurring losses more frequently than they are realizing profits, reflecting a decline in sentiment and a decrease in liquidity.

Analysts Indicate Solana is Entering “Complete Liquidity Reset”

The on-chain research firm Altcoin Vector characterized the current situation as a “complete liquidity reset,” a trend that has historically signaled the onset of new liquidity cycles and preceded market lows.

If the current structure resembles that of April, analysts suggest liquidity could start to recover in about four weeks, indicating early January as a potential time for renewed momentum.

A crucial lesson in alt positioning: when liquidity ignites, the movement is rapid. $SOL is undergoing a complete liquidity reset, establishing a new liquidity cycle, similar to previous bottoming phases.
Forced selling subsides, the ecosystem cleanses itself, and SOL begins to establish a foundation for… pic.twitter.com/tiLw6gwhdb

— Altcoin Vector (@altcoinvector) December 5, 2025

Despite the challenges, Solana has not been left without support. Ongoing withdrawals from centralized exchanges have consistently lowered the available supply, while demand from ETF investors continues to grow.

Spot Solana ETFs have recorded $17.72 million in net inflows this week, nearly matching last week’s $20.30 million, according to SoSoValue.

Nonetheless, the overall environment remains delicate. High leverage across crypto markets has intensified volatility, with CoinGlass reporting $432 million in liquidations over the last 24 hours.

Solana represented $15.6 million of that total, making it the third-most liquidated asset after Bitcoin and Ethereum, as the token rose 3.2% on the day, according to CoinGecko.

Analysts believe the mid- to long-term outlook for Solana is somewhat positive, particularly if macroeconomic uncertainties are resolved and liquidity returns to the market.

However, in the short term, declining profitability, reduced liquidity, and significant leverage render the asset susceptible to sharp fluctuations.

As previously reported, Pye Finance has disclosed a $5 million seed round led by several prominent players in the industry. The objective is to transform billions in locked SOL stakes into an active yield market.

This round was led by Variant and Coinbase Ventures, with participation from Solana Labs, Nascent, Gemini, and others, as stated in the press release.

Pye aims to develop bond markets for validators and stakers on Solana (SOL). The platform allows validators to draw and retain stake, enabling them to offer rewards across more than a thousand validators.

Fed Liquidity Boost Could Propel Bitcoin “Sharply Higher”

As reported, Bitcoin’s rise above $92,000 has generated renewed optimism among market observers who now believe this week’s Federal Reserve meeting could trigger a significantly larger rally.

Analysts at the London Crypto Club suggest that a liquidity increase from the Fed on Wednesday may serve as a strong catalyst, potentially pushing the world’s largest cryptocurrency “sharply higher.”

In their latest commentary, David Brickell and Chris Mills contend that the central bank is likely to deliver a “dovish surprise,” predicting that policymakers will inject liquidity through an innovative bond-buying mechanism rather than through explicit quantitative easing.

“We’re entering a continued rate-cutting cycle accompanied by balance sheet expansion as the Fed effectively activates the money printers to monetize the deficit,” they stated.

Meanwhile, a significant on-chain metric known as “liveliness” is rising again, even as Bitcoin’s price movements remain subdued.

Analysts indicate that this divergence suggests renewed underlying demand, with dormant coins moving at levels not observed in years, indicating that long-term holders may be re-entering the market.

Last week, Bitfinex noted that the market is exhibiting “seller exhaustion” following a phase of heavy deleveraging and panic-driven exits by short-term holders.

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