- SEC lawsuit against Kraken labeled Solana (SOL) as a security, which could limit its availability on US exchanges and negatively impact its price
- SOL was overbought with an RSI over 70 and a divergence between rising prices and falling RSI, signaling an overdue correction
- $65 million in long liquidations compelled traders to sell SOL, adding further downward price pressure
Solana (SOL) has seen a significant price drop recently. After rallying nearly 300% over the past few months, the cryptocurrency is now facing a correction. This article explores the major factors causing Solana’s decline.
SEC Labels SOL a Security
The price drop coincides with the SEC‘s lawsuit against crypto exchange Kraken. In its filings, the SEC accused Kraken of securities law violations and labeled several cryptocurrencies, including Solana, as securities. Being designated as a security could limit SOL’s availability on US exchanges, similar to the impact seen with XRP.
Overbought Correction
In addition, SOL’s decline is part of an overbought correction. Solana’s relative strength index (RSI) had jumped above 70, indicating the asset was overextended. Furthermore, SOL’s rising prices recently diverged with its falling RSI, signaling bullish exhaustion.
$65 Million in Long Liquidations
The decline also aligns with $65 million worth of long liquidations across SOL derivative markets. Liquidated long positions compel traders to sell, increasing downward pressure.
Outlook
Technicals suggest Solana’s correction could extend in the coming weeks. Key resistance around $67.40 has rejected SOL’s upside attempts since summer 2022. SOL remains at risk of declining toward $47.50 in the near term, followed by a potential fall to $30 if the former support level breaks down.
