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Solana (SOL) Struggles: What’s Driving the Price Dip?

Writer's picture: Blockonome GnomeBlockonome Gnome

Weak on-chain activity and declining open interest are key factors in Solana's recent price drop.


Solana (SOL) Struggles: What’s Driving the Price Dip?

Solana (SOL), one of the most popular altcoins, has seen its price decline by 10% over the past week, nearly erasing gains from the previous week. This dip is part of a broader market correction, with the total cryptocurrency market capitalization falling by 7.8% on August 28th. Despite recent positive developments, such as the launch of Solana-based PayPal stablecoin (PYUSD) reaching a market cap of $1 billion, the on-chain activity and demand for Solana have weakened significantly in recent weeks.


One of the critical factors contributing to Solana's price drop is the decrease in open interest (OI) in the derivatives market. Over the past 24 hours, Solana's OI has fallen by 12%, coinciding with a 16% price drop in August. The OI, which peaked at $2.83 billion, has now declined to $2.08 billion. This reduction in OI indicates a weakening of the derivatives market, further exacerbating bearish pressure on the SOL token. Liquidations of over $15 million in the past 24 hours, including $13 million in long positions, have further contributed to this downward trend.


Spot selling has also played a significant role in SOL's bearish momentum. Solana has experienced $526 million in spot selling volumes over the past month, making it the third largest among the top ten cryptocurrencies in terms of selling pressure. Despite Bitcoin having a higher absolute spot netflow, Solana's relative selling pressure compared to its market cap is more pronounced, leading to greater negative sentiment among investors.


Technically, Solana has been oscillating within a range of $127 to $162 for most of the past five months. This range has acted as an accumulation zone, with the altcoin repeatedly testing both the upper and lower limits. However, after a flash crash in early August, SOL failed to break above the $162 resistance level, leading to further downward pressure. Based on historical market behavior, analysts suggest that Solana may retest the $127 level in the coming days if it fails to close above $140 in the next week.


Despite the bearish outlook, there is some hope for a recovery. The 200-day Exponential Moving Average (EMA) provides strong support, and if SOL can hold above $140, it may avoid further decline to the $127 level. Traders and investors will be closely watching to see if Solana can stabilize and regain bullish momentum.


photo source / Blockonome

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Blockonome's content is meant to be informational in nature and should not be interpreted as investment advice. Trading, buying or selling cryptocurrencies should be considered a high-risk investment and every reader is advised to do their own research before making any decisions.

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