Wintermute’s $38M Solana Withdrawal Sparks Fears Ahead of $2B Token Unlock

Key Takeaways:

• Wintermute withdrew $38 million worth of SOL from Binance.
• Another $2 billion worth of Solana tokens is expected to unlock, which could intensify selling pressure.
• Analysts are worried about the risk of big holders dumping unlocked tokens.

The crypto community is on edge as market maker Wintermute recently withdrew a large amount of Solana (SOL) from Binance — just days ahead of a massive token unlock event. This exit, alongside a recent price decline and general market fears, has triggered concerns of increased selling pressure on SOL.

Between February 23 and 9:02 am UTC on February 24, Wintermute — a leading crypto market maker — transferred more than $38.2 million worth of Solana from the Binance exchange, data from Arkham Intelligence shows. Analysts and investors alike have noted this move from Wintermute, with some speculating Wintermute’s plan and the impact on the price of Solana.

The timing of this exit is particularly remarkable: It comes just over a week before Solana’s largest token unlock event ever.

Wintermute transfers from Binance hot wallet

On March 1, more than 11.2 million SOL tokens, equivalent to about $2 billion, are set to be put into circulation. This second unlock also increases a huge portion of circulating SOL supply, which has also raised concerning questions of bearish price action.

Solana has already seen a significant price correction. According to the data provided by Cointelegraph Markets Pro, SOL price dropped more than 7.5% in the 24 hours leading up to Feb. 24 to hit $155 — its lowest level in three months. This price level had last been seen in early November 2024. However, the negative sentiment surrounding Solana can also be attributed to the pending token unlock, which has cast a cloud over the Solana ecosystem regardless of broader market conditions.

One of the major factors feeding the frights is that a considerable amount of the locked SOL supply was bought at a diluting discount during the FTX auctions. Companies like Galaxy Digital, Pantera Capital, and Figure purchased these tokens at a price point well below what the tokens are currently worth.

Crypto analyst Artchick.eth noted that more than 15 million SOL — around $2.5 billion — would go into circulation over the 90 days following the unlock date. Artchick.eth also highlighted the difference in purchasing price at the FTX auctions compared to its current market value: “The majority of this SOL was purchased from FTX auctions at $64 by Galaxy, still a very healthy profit. […] By the time this SOL unlocks, another ~$1B of SOL will be produced via inflation and likely dumped as well.”

Crypto trader RunnerXBT shared similar sentiments, noting that the current timeframe is “dangerous” for purchasing Solana. RunnerXBT commented that estimates suggest that firms like Galaxy Digital, Pantera, and Figure could realize potential unrealized gains of $3 billion, $1 billion, and $150 million, respectively, when their SOL unlocks.

There is also a perception that these firms are more likely to sell their holdings to secure profits, particularly in the current market climate.

Further adding to the unease around Solana, the memecoin market has also been embroiled in drama this week. The latest blow to market confidence came from the Libra (LIBRA) memecoin scandal, where a commonly used rug-pulling method allowed insiders to siphon off more than $107 million in liquidity, further undermining investor confidence. This led to a widespread price crash which resulted in the loss of $4 billion of investor capital.

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We believe the future of Solana is brighter than ever, despite the negative press surrounding the Libra scandal, as the community builds a number of innovative projects leveraging all available resources and expertise. It is a stark reminder of the inherent risk of investing in the highly speculative memecoin economy. On top of that, such incidents lead to erosion of trust among investors and the overall sentiment towards Solana is bound to take a hit.

The SQUID token, inspired by the Netflix show Squid Game, experienced a similar rug pull in late 2021. The value of the token rose and rose until the developers cashed out, and investors were left with nothing but worthless tokens. This event, among others, brought attention to the risks of investing in unaudited, speculative cryptocurrencies.

Wintermute’s exit, the looming token unlock, the risk of participants in the FTX auction dumping their Solana holdings in large volumes, and negative sentiment from the memecoin market are combining to make Solana’s prospects look miserable for the near future. Keep in mind that I am providing information only up to June 2024; events beyond this date may have substantially altered the circumstances.

I also do not offer fixed investment advice, and investors should always do their due diligence and assess risk before investing in Solana. In an unregulated financial market, like the cryptocurrency market, unexpected events such as major sell-offs can lead to price changes.

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