Solana Price Prediction: SOL Eyes Recovery to $180 As Network Fees Bounce

Solana (SOL) has been the most battered token in the top 5 in the past 30 days with a 42% loss.

This altcoin is once again approaching the $80 level and could be heading for its fifth consecutive week of negative performance if it closes below $87.

Comparatively, top competitors in the smart contracts space like Ethereum (ETH) and BNB (BNB) have experienced milder losses of 36% and 32%, respectively.

Why exactly is the market dumping SOL at a faster pace?

Solana Rallied Even Though Network Fees Fell

On-chain data from Santiment seems to explain why SOL failed to make an all-time high during the latest bullish cycle.

Solana Network Fees – Source: Santiment

Historical data shows that every time SOL rallied to $200 in previous instances, the uptrend was accompanied by a strong increase in network fees.

However, this was not the case during the latest rally, as fees actually declined even though SOL went on to rise to $240.

This bearish divergence indicated that this was merely a speculative rally, potentially triggered by the launch of Solana exchange-traded funds (ETFs) and not by increased network usage.

This is the equivalent of a stock price rising even though the company’s cash flows are steadily declining. Eventually, the market will correct itself, causing the price to plummet.

Traders Shunned Meme Coins In the Last Bull Run

In previous instances, SOL retreated by 40%, 36%, and 58% from its local top. This time, the decline has been much more dramatic, as SOL has dropped by 66% from its cycle top of $240.

The market might be acknowledging that the network’s fundamentals no longer justify Solana trading above $200.

The poor performance of the meme coin sector could also explain why fees are dropping. Tokens in this category failed to rally alongside the rest of the market during the May-August bullish cycle. As a result, traders’ interest in these tokens may have declined significantly.

Solana’s network usage heavily relies on speculative activity in the meme coin space. If these tokens experience a prolonged winter, fees may sit at or near historically low levels for a long period.

On-Chain Data and Technical Indicators Favor Bullish Outlook for SOL

Despite this gloomy outlook, a bullish divergence has now popped up as fees have been increasing since the year started. Just a couple of days ago, they rose to 65,000 SOL.

Solana Network Fees – Source: Santiment

In the past, when fees rose to these levels, SOL traded between $120 and $180.

Hence, if market sentiment improves and the $75 support shown in the chart holds, we could see SOL bouncing back to this range, meaning an 140% maximum upside potential for the token in the near term.

SOL/USD Weekly Chart – Source: TradingView

The weekly RSI is also sitting at its lowest level since late 2022, which can be considered an early buy signal. The last time this indicator reached similar lows, SOL hit a bottom at $10 and rallied to $27 over the next 7 months.