Solana (SOL) Price Analysis
The price of Solana (SOL) dipped to a 30-day low of $82 on Jan. 22, reflecting a broader trend of crypto investors reducing their holdings in mega-cap altcoins. In this article, we explore the factors behind this decline and examine potential scenarios for the near future.
Understanding Solana’s Performance
Solana stood out as one of the best-performing mega-cap altcoins during the crypto market rally leading up to the spot Bitcoin ETF verdict. However, after reaching a 2-year peak of $126.1 on Dec. 25, the price has seen a downward trajectory.
On-chain data trends provide insights into the key factors influencing Solana’s current decline and offer perspectives on potential price actions in the upcoming week.
Macro Conditions Impacting Solana Price
Despite maintaining strong growth metrics in network usage and daily active users since the beginning of the year, Solana’s price fell to $82 on Jan. 22, resulting in a weekly loss of around 20%. The decline is attributed to bearish sentiment prevailing in the broader altcoin markets.
The TOTAL3 chart on TradingView, representing the market capitalization of all listed crypto assets excluding Bitcoin (BTC) and Ethereum (ETH), indicates an 8% downtrend during the same period, reflecting a $32 billion shrinkage in the global altcoin market over the past week. As the 8th largest cryptocurrency, SOL price has been disproportionately affected.
Without a significant improvement in market sentiment, there is potential for further downside for SOL.
Derivatives Market Activity
In the derivatives market, Solana investors are closing out positions in anticipation of additional price declines. Santiment’s open interest data reveals a decrease of $226 million in SOL open interest since Jan. 17.
A closer examination of the chart shows a $1.3 billion decline in Solana open interest from Jan. 17 to $1.06 billion at the time of writing on Jan. 22, indicating a 20% decrease in price.
A decline in open interest signifies more investors exiting their positions than those entering, confirming a growing disinterest among crypto investors.
Solana Price Forecast: Potential Target at $75
Considering insights from derivatives and market data trends, SOL price may continue its decline towards the $75 range in the coming days. Bollinger bands technical indicators support this bearish outlook, indicating that SOL, currently trading at $82, has fallen below the 20-day Simple Moving Average price of $93.
While the bulls might attempt to regroup around the lower-Bollinger band at $85 for an early rebound, a breach of this level could lead to a further slide towards $75. On the upside, regaining control above $95 may be challenging, as the 20-day SMA at $95 could act as a significant resistance point.
