It’s been a rough few weeks for Solana. The coin reached an ATH of $258 in early November but has since dropped more than 70% to its current price of $51. This makes Solana one of the biggest losers in the cryptocurrency industry.
Possible Causes
There are a few factors that likely contributed to Solana’s price decline. First, the overall cryptocurrency market has been in a correction since early January. This has affected all coins, not just Solana.
Second, Solana may have been overextended in the run-up to its ATH. This means that the coin was likely overbought and due for a correction. The recent downtrend of NFTs also ushered in the lowered value of Solana. if the rumors of the NFT technology as “just a business trend” would continue, this potential digital asset may turn into rubbish if ever people realize there is no real purpose behind it.
Third, the global market has reached a state of tension as inflation continues to spike and the stock market’s downward influence on the crypto market.
Fourth, more blockchain projects plan to surpass the prowess of Solana. For example, Bitgert (more on this below) has proven its worth through its faster transfers and lower fees than Solana. If more projects can overtake the current state of Solana, then the price of SOL may continue to lower.
Lastly, the latest depegging of US Terra and the death spiral of the LUNA token from $100 to 0 brought fear into the hearts of investors. The trust in crypto rapidly dwindled after Terra’s drop with LUNA investors losing everything. Such decline created a domino effect in the crypto world.
Competition
The dramatic reduction in operating costs at Solana, which is expected to dip by 70% this year, has been influenced by a number of reasons, one of which is the terrible market. The cryptocurrency market has been declining since Q4 2021, when most coins were harmed. Despite Solana’s plunge, the problem affects virtually all blockchain companies.
The FED has been implementing policies in the money market that have caused the Solana price to fall. The adjustments have been prompting large withdrawals. Since the market impacted Solana hard, its value has dropped every time new FED regulations are introduced.
However, as the Solana ecosystem has developed and expanded, it has been surpassed by other competing coins such as Bitgert (BRISE). In fact, one of the projects that has outperformed the Solana blockchain is Bitgert. According to crypto specialists, a significant number of Solana selling investors have joined Bitgert. As a result, the move has been pressuring Solana’s price.
Predictions
The continuous decline of Solana might come to an end as some market analysts think that the current price is a good buying opportunity. The recent market crash may have presented a chance for investors to buy the SOL token at a low price. However, it is still too early to give a clear forecast as the price of Solana is still highly volatile.
The general guideline for short-term investment is “buy low, sell high.” In other words, buy when the price is down and sell when it goes up. However, some market analysts are advocating for a more patient approach when it comes to Solana.
