Solana Faces Potential Decline as Market Sentiment Weakens and Sellers Increase

• Solana faces increasing pressure as it grapples with declining trading volume and a heightened number of sellers entering the market.

• This drastic drop in interest has led to a significant decrease in the total value locked (TVL) in Solana’s ecosystem, raising concerns about its future viability.

• “The market dynamics indicate a concerning trend as SOL’s support levels crumble, putting investors in a precarious position,” noted a recent report by COINOTAG.

Solana shows rising selling pressure and declining trading volume, raising concerns over its value and future in the crypto market. Can it recover?

Momentum Falls Massively as SOL Weaken

In recent weeks, Solana’s momentum has dwindled, heavily contributing to its price decline. Currently, the altcoin’s trading volume has plummeted to approximately $3 million per day, marking the lowest levels seen since September 2024. Such low trading activity suggests that market participants are decisively selling their holdings.

Source: Glassnode

As both trading volume and price experience declines, the potential for a further reduction in demand is significant. The lack of buyer interest coupled with a sharp decrease in activity indicates a market under strain.

Moreover, the total value locked (TVL) in Solana’s protocols has also seen a sharp decrease. It reached a high of $12.19 billion in January but has now diminished to approximately $6.69 billion as of recent reports. This downturn signals a shift as investors liquidate their assets amid a declining confidence in SOL’s future performance.

Potential Drop to $100 or Below

Recent analyses suggest that Solana could face a critical support level at $100. If it fails to maintain above the next psychological threshold at $128.01, we may witness a market drop down to $100 or even lower. Support levels traditionally allow for price stabilization and potential rebound; however, breaking through these levels typically signifies overwhelming selling force.

Source: TradingView

Failure to hold above $100.34 could lead to further declines, potentially easing to $85. Such levels have not been observed since 2024, indicating a move back into the two-digit price territory.

An examination of the liquidation heat map has identified several liquidity clusters between the $120 and $114 levels, often provoking price movement in the market. Given the present downtrend, it is plausible for SOL to retreat further and establish new lows, intensifying market anxieties.

Source: Coinglass

Not All Traders Are Bearish

Despite the overall bearish sentiment, there are indications of bullish perspectives emerging within the derivatives market. A notable uptick in buying volume suggests that some traders are placing long bets on SOL, anticipating a rebound.

Current metrics from Coinglass reveal a long-to-short ratio at a level slightly above 1.004, illustrating an environment where buyers are marginally outnumbering sellers, which often precedes price rebounds.

Source: Coinglass

Moreover, the OI-weighted funding rate, which assesses both open interest and funding rates, displays positive sentiment, registering at 0.0086%. This uptick suggests that increased long positions in the market could signal a potential rebound for Solana if the current trend persists.

If the buying pressure in the derivatives market sustains and Solana manages to reclaim the critical support level around $128, we might see a much-needed turnaround. However, the risks of further decline remain palpable, making it imperative for traders to stay vigilant.

Conclusion

In summary, Solana is at a crossroads, battling increased selling pressure and declining liquidity. Key support levels will play a crucial role in determining the asset’s future trajectory. While bullish sentiment within the derivatives market offers a glimmer of hope, the path forward is fraught with uncertainties. Investors are advised to closely monitor the evolving situation and hedge against potential downturns.