Further decline expected
Solana (SOL) experienced a significant drop in price on January 22, reaching a 30-day low of $82. This decline can be attributed to a decrease in altcoin acquisitions by crypto investors. Let’s take a look at what could happen next for Solana.
Despite the recent decline, Solana had been performing exceptionally well as one of the top mega-cap altcoins leading up to the spot Bitcoin ETF verdict. However, since hitting a two-year peak of $126.1 on December 25, the price has been on a downward trend.
On-chain data analysis reveals the key factors driving the current decline and provides insight into potential price action in the upcoming week.
The decline in Solana’s price can be attributed to the bearish sentiment surrounding the broader altcoin markets. The TOTAL3 chart on TradingView, which represents the market capitalization of all listed crypto assets excluding Bitcoin (BTC) and Ethereum (ETH), shows an overall 8% downtrend, aligning with Solana’s 20% drop between January 14 and January 22.
Additionally, the global altcoin market has shrunk by $32 billion in the past week, indicating a decrease in investor confidence in the sector as a whole. As the 8th largest cryptocurrency, it is not surprising that Solana has been disproportionately affected by this trend.
Unless there is a significant improvement in market sentiment, Solana could continue to experience downside movement.
Investors are preparing for further declines by closing out their positions in the derivatives market. Santiment’s open interest data, which tracks the value of all active derivatives contracts for a specific cryptocurrency, shows that Solana’s open interest has decreased by $226 million since January 17.
A closer look at the chart reveals that Solana’s open interest dropped from $1.3 billion on January 17 to $1.06 billion on January 22, corresponding to a 20% price decline.
This decline in open interest indicates that more investors are exiting their positions than those entering, highlighting a growing disinterest among crypto investors.
Considering the derivatives and market data trends analyzed above, it is likely that Solana’s price will continue to decline towards the $75 range in the coming days.
The Bollinger bands technical indicators also support this bearish outlook, as Solana’s price is currently trading below the 20-day Simple Moving Average price of $93.
In other words, investors are now willing to pay less for Solana compared to 20 days ago.
However, there is a possibility of a rebound if the bulls can regroup around the lower Bollinger band at $85. If they can break through this level, it could trigger an early recovery. On the other hand, if the bears manage to break through the buy-wall at $85, Solana’s price could slide towards $75, as predicted.
On the upside, the bulls could regain control if they successfully push the price above $95. However, the 20-day SMA at $95 may act as a significant resistance, as investors who have been holding unrealized losses for the past 20 days may choose to exit once the price approaches their break-even point.
In conclusion, the ongoing decline in Solana’s price can be attributed to the volatility in the altcoin markets and negative trading activity among derivatives speculators. Based on the analysis of derivatives and market data trends, it is likely that Solana’s price will continue to decline towards $75 in the near future.
