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Home BREAKING NEWS

Solana Could Drop 25% and Here is Why

Matoy by Matoy
August 1, 2024
in BREAKING NEWS, CRYPTO
Reading Time: 3 mins read
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  • Solana faces potential 25% drop if it fails to hold the critical $165 support level.
  • Market trends show Solana’s increased correlation with Bitcoin, affecting its price movements.
  • Concerns over memecoin activities and bot trading raise scrutiny within the Solana ecosystem.

Solana is currently facing a crucial test of support at the $165 mark, a level that previously marked equal lows earlier this week. Should it break below this threshold, Solana risks a potential 25% decline to $122 in the coming weeks, amid broader market trends and internal ecosystem concerns.

Market Dynamics and Correlation

The recent 8% correction in Solana’s price is closely tied to overall market movements, particularly in light of recent outcomes from the Federal Open Market Committee meeting, where interest rates were left unchanged. This decision contributed to a 3% dip in Bitcoin prices, which in turn influenced Solana’s decline to $166. Data indicates that the correlation between Bitcoin and Solana has increased significantly, currently standing at a 0.67 correlation index, reflecting synchronized price movements between the two cryptocurrencies.

Liquidations and Ecosystem Challenges

According to Token Terminal, the market downturn has also led to significant liquidations within Solana’s futures and perpetual markets, with open interest decreasing from $2.78 billion to $2.39 billion in just 48 hours. This represents about $400 million in leveraged positions being closed, with liquidations amounting to $14 million over the past day. These figures highlight the volatility and rapid changes in investor behavior within the Solana market.

Adding to the ecosystem’s challenges are the activities surrounding Solana-based memecoins, particularly those generated by tools like Pump.fun. Although these tools have seen substantial revenue, surpassing even Ethereum in some metrics, they’ve also drawn criticism for contributing to low-liquidity trading pools prone to bot manipulation. Instances of inorganic trading volumes driven by bots have raised concerns about the overall health and transparency of the Solana ecosystem. Critics argue that such activities may disproportionately benefit bots and their operators, at the expense of regular investors.

Solana’s Technical Outlook

From a technical standpoint, Solana is at a make-or-break moment. The cryptocurrency is retesting its recent lows, and the outcome of this test could significantly influence its short-term price trajectory. The relative strength index (RSI) is approaching a neutral 50, suggesting an equilibrium between buyers and sellers at this key juncture. A failure to maintain the $165 level could precipitate a sharp decline to $122, marking a 25% fall.

Conversely, Solana has shown patterns that suggest potential for recovery. Earlier in the week, it formed what appeared to be a double bottom pattern, a bullish signal that could indicate upcoming positive momentum if the asset manages to stabilize and build support above the critical $165 level.

Disclaimer: BlockNews provides independent reporting on crypto, blockchain, and digital finance. All content is for informational purposes only and does not constitute financial advice. Readers should do their own research before making investment decisions. Some articles may use AI tools to assist in drafting, but every piece is reviewed and edited by our editorial team of experienced crypto writers and analysts before publication.
Tags: Solana
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Matoy

Matoy

If Matoy is not busy looking at the latest Web3 news, he's always in the kitchen cooking delicious meals for his family. He's also a competitive fighting game player and a car enthusiast

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