Solana: The Potential for a 30% Drop After Losing Critical Support

The cryptocurrency market is experiencing a downturn, particularly affecting Solana (SOL), which recently lost crucial support levels, leading to increased bearish sentiment among traders and investors. A spike in trading volume indicates active market participation, although the asset's price decline has raised concerns about further losses. This article explores the implications of these changes on Solana's price and future outlook.

Key Takeaways

Solana (SOL) has lost a vital support level at $118, which it previously defended since March 2024.
A newly created wallet has deposited 2 million USDC and opened significant short positions, contributing to bearish sentiment.
SOL's price dropped by 6.65%, trading around $115, with a trading volume increase of 105% to $7.60 billion.
Analysts suggest a possible further decline of up to 30%, predicting a price drop to the $78 level if SOL remains below $118.
Traders are focused on key price levels of $112.8 and $120.2, with significant short-leveraged positions indicating a bearish outlook.

Solana: Why SOL risks a 30% drop after losing KEY support

Market Overview of Solana

The cryptocurrency market has faced significant selling pressure, and Solana (SOL) has been particularly affected, with market sentiment increasingly leaning towards bearish. Recently, SOL fell below the crucial support threshold of $118, a level it had successfully maintained since March 2024.

Adding to the bearish trend, a new wallet deposited 2 million USDC in the Hyperliquid decentralized exchange and established multiple short positions. Crypto tracker Onchain Lens highlights this development as indicative of the current market mood. Furthermore, this wallet has taken a large short position of $6.15 million with an entry price at $122.91.

Additionally, trends observed in the traditional market also mirror this sell-off. An analysis by on-chain analytics platform SoSoValue indicates that U.S.-based Solana Exchange-Traded Funds (ETFs) have experienced significant capital outflows totaling $2.22 million, suggesting that both investors and institutions are pulling back from this asset.

spot Solana ETFs
Source: SoSoValue

SOL Price Trends and Levels to Watch

As of the latest updates, SOL has experienced a 6.65% decline over the last 24 hours, trading close to $115. Despite this decline, trading activity surged, with a significant 105% jump in SOL’s trading volume to $7.60 billion. This higher trading volume indicates a strong interest from traders and investors, which drives increased market participation.

Analyzing the price charts reveals that SOL has broken below a major support level of $118, which it had previously bounced off more than ten times in the past.

Solana (SOL) price action
Source: TradingView

From the daily charts, the potential for a strong decline in SOL could lead to a 30% drop, pushing the price down to approximately $78 soon. However, this bearish scenario would only be confirmed if SOL remains or closes a daily candle below the $118 mark.

Solana (SOL) price action
Source: TradingView

Technical indicators support the bearish outlook for SOL. The asset is currently trading below the 50-day Exponential Moving Average (EMA), pointing to short-term bearishness. Additionally, the Average Directional Index (ADX) is at 33, above the critical threshold of 25, indicating a strong present trend.

Traders Anticipate Short-Leveraged Positions

From the perspective of derivatives trading, it appears that traders are favoring bearish positions. According to data from CoinGlass, current intraday traders are keeping a close eye on key price levels. They are focused on support at $112.8 and resistance at $120.2, where significant leveraged positions have been established.

The total amount of short-leveraged positions stands at $55.15 million, contrasted with a much larger long-leveraged position of $241 million, indicating a current tension in the market as traders prepare for sharp movements.

SOL Exchange Liquidation Map
Source: CoinGlass

This data provides a clear insight into how intraday traders are currently viewing Solana.

Conclusion

In summary, the situation surrounding Solana (SOL) remains precarious as the asset navigates critical support levels amid a broader bearish trend in the cryptocurrency market. Coupled with increased trading volumes and significant short positions from traders, SOL's price could experience further challenges in the near future.