Solana (SOL) has been making positive noise recently with a surge in its price. However, one crypto strategist known as Altcoin Sherpa on the social media platform X, believes that the euphoria may be short-lived.
Despite last week’s notable rally, Altcoin Sherpa argues that Solana is still trapped in a downtrend, casting doubts on the sustainability of its current momentum.
Altcoin Sherpa points out a critical resistance level at approximately $19.50 that Solana must overcome to change its trajectory. The crypto analyst highlights a concerning pattern: Solana has been consistently forming lower highs since reaching its 2023 peak of $32.30 back in July. This pattern suggests that each attempted rally has been met with increasing selling pressure, raising questions about the strength of the recent recovery.
Altcoin Sherpa advises caution for those considering entering the market, stating:
“It’s nice to see some recovery, but every rally in the last few weeks has resulted in just a lower high. Regardless, if you’re in it for an investment, it can’t be bad to accumulate sub-$20.”
Currently, Solana is trading at $19.12, according to CoinGecko, showing a modest 1.1% gain in the last 24 hours and a seven-day rally of 4.5%.
Solana Support Hinges On FTX Liquidation
In the event that SOL’s latest rally loses steam, Altcoin Sherpa identifies the $14 level as a potential support zone. However, he underscores a crucial factor that could influence Solana’s fate in the short term—the imminent liquidation of a massive Solana stash held by the troubled crypto exchange FTX, amounting to a staggering $1.16 billion. The outcome of this liquidation could significantly impact Solana’s price stability.
SOL market cap currently at $8.08 billion. Chart: TradingView.com
Supporting Altcoin Sherpa’s bearish outlook is an analysis of key technical indicators. The Relative Strength Index (RSI) is indicating a decline in momentum, hinting at a potential downturn for Solana. Furthermore, the Awesome Oscillator (AO) has ventured into the negative territory, providing additional validation for the bearish sentiment.
If selling pressure continues to intensify, Solana’s price could test the psychological level of $18.00, hovering around the midline of its current trading channel. In a more dire scenario, SOL could plunge even further to reach the lower boundary of the channel at $17.29.
The quantity of long positions that have already been liquidated is 45 times that of short positions, according to the liquidation statistics provided by CoinGlass.
Source: Coinglass
Potential Turning Point
However, there is a glimmer of hope for Solana investors. In the worst-case scenario, if the downtrend persists, Solana’s price could eventually find support in the demand zone, marked by the last candlestick before the remarkable July uptrend began. This area tends to attract buyers and might serve as a potential turning point for SOL’s fortunes.
While Solana’s recent rally has generated excitement, caution is advised, as technical indicators and market dynamics point towards a possible continuation of the downtrend. The crypto world remains as unpredictable as ever, and investors should carefully consider their options before diving in.
(This site’s content should not be construed as investment advice. Investing involves risk. When you invest, your capital is subject to risk).
Featured image from Adobe Stock
