Is Solana about to slide further, or a bullish reversal is imminent?

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Is Solana about to slide further, or a bullish reversal is imminent?

By Motiur Rahman - min read

Solana (SOL/USD) trades at $30.5 after an intraday gain of 2.22%. However, weekly losses total 6.42%. A brief check of the price action shows that this is a support zone for the cryptocurrency. To a technical reader, the area remains of interest. 

Solana has been touted as an Ethereum killer due to its fast speeds and low transaction costs. Yet, the blockchain shares significant similarities with the Ethereum ecosystem. However, the name tag is quickly getting eroded as a series of hacks have hit the Layer-1 blockchain. Rising capital outflows have been commensurate with the price decline.

As of October 13, data by CoinMarketCap shows that Solana had a total capitalisation of $10.6 billion. That was a 13% or $1.43 billion decline from October 6. The drop coincided with a $100 million exploit of Mango Markets, a Solana DeFi protocol. SOL has been under pressure since then, although the market cap has improved slightly to $10.9 billion

While macro issues, including high inflation, are to blame for SOL’s decline, the hacks send wrong market signals. That partly explains why the cryptocurrency is struggling at the $30 level. In our assessment, a further decline is a more probable outcome than a bullish reversal. 

Solana retests $30 supported-turned resistance

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The daily chart above shows that $30 has already become a resistance. Potentially, SOL is retesting it before proceeding lower. A lack of positive sentiment is to blame, with the momentum weakening into bear territory. 

Which way, SOL?

A retest of the $30 resistance could force a further decline, with the next potential zone for SOL at $26. However, buyers could try to overcome a further drop and keep SOL above $30. 

Although the bull scenario looks less likely, we should watch for price action at the potential resistance. Bulls must also overcome the descending trendline to consider a more lasting upside.