Bitcoin’s Tuesday buying spree spurred major altcoins higher, but Solana’s underlying health is on shaky ground amid retreating liquidity and market uncertainty.

A look at Solana’s 30-day average realized profit-to-loss ratio shows it has traded below one since mid-November, according to a Wednesday tweet from on-chain analytics platform Glassnode.

A ratio below one indicates that realized losses exceed profits, suggesting that liquidity has contracted to bear-market levels.

“Solana is under a full liquidity reset,” on-chain analytics platform Altcoin Vector tweeted on Saturday. That signal has indicated the start of a new liquidity cycle and has led to “bottoming phases” in the past.

“If the pattern repeats April’s setup, reignition could take around four more weeks, lining up with early January,” Altcoin Vector analysts noted.

"The reset is being driven by realized losses prompting sell-offs, a decline in futures open interest, market-makers pulling back, and liquidity fragmenting across trading pools," Wenny Cai, COO of SynFutures, told Decrypt.

While the mid- to long-term outlook remains slightly bullish, especially if macroeconomic overhangs clear, the near term remains noisy and susceptible to shocks.

On one hand, there is structural bullish support from investors scooping up Solana after the recent downtrend. On the other hand, there’s a significant risk of liquidation amid increasing leverage.

That support is materializing in two forms: a persistent outflow of Solana from exchanges, reducing readily available sell-side supply, and continued capital flowing into spot Solana ETFs, which have accumulated $17.72 million in net inflows this week, nearly matching last week’s $20.30 million haul, according to SoSoValue data.

“This presents an opportunity for strategic accumulation and network upgrades, fostering long-term resilience and innovation in the Solana ecosystem,” Ryan Lee, chief analyst at BitGet, told Decrypt.

Despite these underlying bids, leverage market conditions remain tense.

Bitcoin’s muted price action and large liquidation spikes indicate that leverage remains relatively high across the broader crypto market, as evidenced by $432 million in liquidations over the past 24 hours, according to CoinGlass data. 

With Solana rising 3.2% over 24 hours, per CoinGecko data, $15.6 million in positions were forced to close, making it the third-largest liquidated asset, behind Bitcoin and Ethereum.

The spike in liquidations followed Bitcoin’s bounce, as Decrypt previously reported. Still, $500 million in long positions would be liquidated if Solana drops to $129, roughly 5.5% below its current price of $137.

If Solana were to drop lower, triggering the aforementioned long liquidation cluster, it would be a sign of a healthy market reset, Lee added, indicating that it would “clear excess leverage” and pave the way for renewed institutional inflows and a stronger rebound for Solana.

On the flip side, a near 3% move would catalyze $110 million in short covering, adding more fuel to Solana’s recent bounce.