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Home BREAKING NEWS

Solana’s Price Went Down and Here is Why

by Matoy
May 8, 2024
in BREAKING NEWS, CRYPTO
Reading Time: 2 mins read
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  • Solana (SOL) price has declined by over 2.1%, correlating with a reduction in the Total Value Locked (TVL) within its ecosystem and increased demand for the U.S. dollar.
  • FTX’s liquidation of SOL holdings at a discount has contributed to bearish sentiment around Solana, with further auctions expected.
  • The U.S. dollar’s recovery is adding pressure on crypto prices, including SOL, which is inversely correlated with the dollar index.

Solana’s native token, SOL, has experienced a notable decline, dropping over 2.1% to approximately $145 on May 8. This recent price movement is part of a broader correction that commenced a day earlier when SOL peaked at around $160. Several factors have contributed to this downturn, including strategic asset sales by FTX and a strengthening U.S. dollar.

FTX’s Impact on Solana’s Market

FTX’s ongoing bankruptcy proceedings have led to the liquidation of its cryptocurrency holdings, including a significant portion of Solana. The exchange has confirmed it will have ample funds to cover its liabilities after liquidating its assets, including up to $16.3 billion in cash expected post-sales. Notably, FTX executed these sales at considerable discounts, with recent transactions seeing nearly two-thirds of its SOL reserves sold to entities like Galaxy Trading, Pantera Capital, and Neptune Digital Assets at a 63% markdown. This has spurred bearish sentiment within the market, reflecting in SOL’s price, which plummeted by as much as 37% post-auction.

Decrease in TVL and Its Implications

The price decline aligns with a decrease in the Total Value Locked (TVL) across the Solana ecosystem, which fell to 26.92 million SOL on May 8 — the lowest point in the month. TVL is crucial as it represents the amount of SOL staked or locked in various decentralized finance (DeFi) protocols, influencing the demand and price of SOL. A reduction in TVL suggests a diminished demand for Solana, further exerting downward pressure on its price.

U.S. Dollar’s Strengthening and Crypto Prices

Adding to the complexities is the strengthening of the U.S. dollar, evidenced by the recovery of the U.S. dollar index (DXY) to 105.64 on May 8, marking a significant rebound from its recent low. This resurgence has put additional pressure on cryptocurrencies, including SOL, due to their inverse correlation with the dollar. The ongoing economic narrative and hawkish signals from U.S. Federal Reserve officials have bolstered the dollar’s appeal, detracting from riskier assets like cryptocurrencies.

The technical analysis of SOL’s price action suggests that the recent declines could be part of an overbought price correction, with its Relative Strength Index (RSI) previously exceeding 70. However, the formation of a cup-and-handle pattern indicates a potential bullish reversal, which could see SOL’s price targeting around $205, approximately a 40% increase from current levels, should it break above the pattern’s neckline.

Tags: FTXSolana
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