Solana’s price is at risk of a significant downturn as technical indicators suggest a bearish trend may be on the horizon. On the 12-hour chart, a death cross appears to be forming, which could signal further losses for traders. If this death cross materializes, SOL’s price might fall below the critical $110 mark.
As market dynamics shift and technical indicators signal a potential downturn, traders are closely watching Solana’s charts for signs of where the price might head next. With the market already showing signs of bearish momentum, the formation of this death cross could spell trouble for SOL, potentially leading to a sharp drop in its price, making it harder for SOL to regain its ground.
Solana’s Emerging Death Cross
On Solana’s 12-hour chart, the 50-day Simple Moving Average (SMA) is edging closer to crossing below the 200-day SMA, forming what traders refer to as a death cross. This is a bearish pattern often interpreted as a signal to sell or short the asset, as it typically suggests a significant downtrend is imminent. Various technical indicators further support the likelihood of a bearish trend for Solana, making the potential death cross more concerning.
One of the key indicators, the Directional Movement Index (DMI), shows that bearish momentum is currently dominating Solana’s market. The Positive Directional Indicator (+DI), which measures the strength of upward price movements, is currently below the Negative Directional Indicator (-DI), which tracks the strength of downward movements. This setup indicates that sellers are exerting more control over the market, driving prices lower. At the time of writing, SOL-USDT pair is trading at $143.52 on Gate.io, having lost 16% of its value over the past month.
Additionally, the Parabolic Stop and Reverse (SAR) indicator, which is used to determine the direction of an asset’s price and potential reversal points, is showing bearish signs. The indicator’s dots are positioned above SOL’s current price, confirming that the asset is in a downtrend and suggesting that this trend may persist.
More on a Death Cross
A death cross is a technical analysis pattern that signals a potential shift from a bullish to a bearish market trend. It occurs when a shorter-term moving average, typically the 50-day Simple Moving Average (SMA), crosses below a longer-term moving average, usually the 200-day SMA. This crossover is considered a strong bearish indicator because it suggests that the asset’s momentum is shifting downward, and the previous upward trend may be coming to an end.
The death cross is widely regarded as a reliable predictor of extended price declines, as it reflects a significant change in market sentiment. When the 50-day SMA, which tracks more recent price movements, dips below the 200-day SMA, which represents a longer-term trend, it indicates that the asset’s price has been under sustained selling pressure. This crossover suggests that the asset has lost its upward momentum, and traders often interpret it as a signal to sell or short the asset to avoid potential losses.
Historically, the death cross has been observed before some major market downturns, making it a key tool for traders and analysts looking to predict and respond to market movements. However, it’s important to note that while the death cross is a strong bearish signal, it is not always followed by a severe or immediate price drop. Market conditions, investor sentiment, and other factors can influence the outcome, and in some cases, the pattern may even be followed by a price rebound. Nevertheless, the formation of a death cross typically triggers increased caution among traders, as it often heralds a period of increased volatility and potential downside risk.
SOL Price Projection
Solana’s price surged significantly in 2024 due to a combination of factors that reinvigorated interest and confidence in the blockchain platform. One of the primary drivers was the substantial increase in the total value locked (TVL) within Solana’s ecosystem, which jumped to $5 billion by May. This growth was fueled by heightened activity in decentralized finance (DeFi) applications and the integration of Solana with major platforms like PayPal, which chose Solana for its PayPal USD (PYUSD) stablecoin due to the blockchain’s speed and low transaction costs.
Additionally, Solana’s involvement in emerging markets like meme coins and its expansion into staking services in new regions, such as Europe, also contributed to its rise. The community’s decision to tweak its fee structure to benefit network validators further solidified Solana’s appeal, despite some concerns about its impact on token inflation. These developments, coupled with growing daily active users and increased trading volumes, created a strong upward momentum for Solana, pushing its price higher throughout the year
However, supporting the bearish outlook, SOL has maintained a negative funding rate on exchanges over the past few weeks, indicating a higher demand for short positions among futures traders. As of now, the funding rate stands at -0.0029%. If this bearish sentiment continues, SOL’s price could drop to $134. Should the bulls fail to defend this support level, the price may further decline to $110, a level not seen since the broad market downturn on August 5. However, a shift in market sentiment from bearish to bullish could push SOL’s price up to $148.
