By July 2024, the pound to sol exchange rate experienced serious volatility, up by 18% in a cumulative 30-day period (from £49 to £58), but backtracked recently to £54 (down 6.9%) on anticipation of interest rate hikes by the Bank of England. CoinGecko data shows that the 30-day annualized volatility of SOL/GBP touches 65%, far higher than the 12% of the GBP vs. the US dollar due to the high beta nature of the cryptocurrency market and the UK monetary policy correlation. For instance, in June 2024, the UK CPI went up 5.2% year-on-year, boosting the probability of market interest rate hikes to 70%. This resulted in a 9% weekly decline in SOL/GBP (from £61 to £55.5), while BTC/GBP fell only by 3.2% over the same period.
Technical charts reflect short-term risks: SOL/GBP’s RSI on a 4-hour chart is 61 (overbought at 70), and the Bollinger Bands are at ±11%, suggesting that volatility is set to increase. On-chain data platform Nansen added that UK CEX’s net inflow of SOL increased by 42% in Q2 2024 (to 240,000, or approximately 13.92 million pounds), but it was a net outflow of 85,000 (approximately 4.93 million pounds) in the first two weeks of July, a sign of temporary profit-taking. The market maker Wintermute’s algorithmic trading scheme has been showing that the median cross-exchange spread of SOL/GBP is £0.6 (with a mean daily arbitrage return of 0.15%) that attracts high-frequency strategy capital to pour in.
Regulatory policies suppress the medium-term trend: The UK FCA included SOL in the list of high-risk assets in April 2024 and requested exchanges to impose extra KYC (such as a 90-day trading history check), which reduced Bitstamp’s SOL/GBP trading volume by 37% on a monthly basis. However, compliant platforms such as Revolut have defied the trend. Its SOL staking product (annualised return of 5.8%) has driven UK user holdings up by 120%, with locked value to £23 million. With the approval of the Bitcoin ETF, the market expects the SOL Spot ETF to be delayed until 2025 to hinder the institutional capital inflows.
Macroeconomic and geopolitical pressures aligned: Throughout May 2024’s UK general election, the pound dropped by 3% against the euro, but the sol to pounds rate rose by 7% against the trend (as investors ran to crypto assets to hedge against political risk). Long-term data show that the 90-day correlation of SOL/GBP with the FTSE 100 index is -0.38, which suggests that cryptocurrencies are more in demand when the stock market is declining. For instance, during the UK pension crisis in September 2023, SOL/GBP rose by 22% in one week while the FTSE 100 index declined by 6.7%.
Extreme cases in the market point towards risk: In November 2022, the FTX collapse provoked a 72% drop in SOL/GBP in just 48 hours (from £80 to £22.4), yet the pound declined by only 2.1% against the dollar. When the Solana network was congested in March 2024, the SOL/GBP spread widened to £1.2 (the arbitrage return between CEX and DEX reached up to 0.8%), yet the failure rate of on-chain transactions increased to 15%, causing some exchange orders to be delayed by 2 hours.
Operation suggestion: If the holding cost is below £40 (according to IntoTheBlock, 51% of addresses are still profitable), dynamic take-profit can be modified (e.g., liquidating 20% of positions for every 10% increase). Short-term traders can use BitMEX’s SOL BP25% volatility index derivatives for hedging. The premium on a one-month option is approximately 4.2% (one SOL costs £2.27). In regards to the availability of liquidity, the order book depth in the London session (UTC+0) is 40% higher than in the Asian session, with slippage reduced to within 0.5%, which is suitable for mass conversions.