Solana (SOL) Price Forecast: Consolidation above $80, or $70 Retest?

Key Insights:

• Solana (SOL) price recently slid to a 30-day bottom of $82 on Jan 23.
• The TOTAL3 (altcoin market cap) chart shows that Crypto investors scaled back on mega-cap altcoin acquisitions this week.
• SOL open interest has dropped by $120 million this week suggesting the derivatives traders are bracing up for more downside.

Solana (SOL) price tumbled toward $80 on Jan 23, its lowest in 30-days. While Solana has maintained strong fundamental on-chain growth metrics, market data trends shows that investors are scaling back on altcoin acquisitions this week.

On-chain data trends reveal key factors driving the current Solana decline and what price action to anticipate in the week ahead. Will Solana price break below the $80 support?

Solana Price Decline Attributed to Altcoin market Downturn

Solana emerged one of the best performing mega cap altcoins, as the crypto market entered a 3-month rally in the build up to the spot Bitcoin ETF verdict. But, since SOL hit a 2-year peak of $126.1 on Dec. 25, things have headed south.  

Interestingly, since the turn of the year, Solana network has maintained strong underlying growth metrics, with the Layer-1 network usage and daily active users on a steady rise. Despite this, Solana price fell to $82 on Jan 22, bringing its weekly time frame losses to the 20% mark. 

The Solana price decline has been attributed to bearish headwinds emanating from the broader altcoin markets.

TradingView’s TOTAL3 chart presents real-time aggregate market capitalization of all listed crypto assets excluding Bitcoin (BTC) and Ethereum (ETH). 

As shown below, while SOL price has decline 20% between Jan 14 and Jan 22, the TOTAL3 chart also entered an 8% downtrend. 

 

The TOTAL.3 chart (total crypto market cap excluding BTC & ETH) shows that the global altcoin market has shrunk by $32 billion over the past week.

This is a tell-tale signal of investor disinterest in the altcoin market sector as a whole. As the 5th largest cryptocurrency, it’s not surprising that SOL price has been substantially impacted. 

Without a significant improvement in the overall altcoin market sentiment, SOL could experience more downside. 

Derivatives Traders are bracing up for more downside

In the derivatives markets, Solana traders appear to be closing out their positions in anticipation of further price downswings. Santiment’s open interest data tracks the real-time value of all active derivatives contracts for a particular cryptocurrency.

The chart below depicts that SOL Open Interest is down $226 million since Jan 17. 

A closer look at the chart shows that Solana open interest dropped from $1.3 billion on January 17 to $1.06 billion at press time on Jan 23. This represents a whopping 20% decline. 

When open interest drops, it means that more investors are exiting their positions than those bringing in fresh capital. This further affirms the growing disinterest among SOL investors. 

In summary, the widespread volatility in the altcoin markets and negative activity among derivatives traders are two major factors behind the ongoing Solana price downtrend. 

Forecast: Solana’s $80 price support at risk

Drawing insights from the derivatives and market data trends analyzed above, SOL price is likely to experience more downside toward the $75 area in the days ahead.

The Bollinger bands technical indicators also affirm this bearish outlook. It shows that, with SOL price currently trading as $83, it has now wobbled below the 20-day Simple Moving Average price of $95. 

In simple terms, this means that investors are now willing to pay much less for Solana price than 20 days ago. 

However, the bulls could regroup around the lower-Bollinger band at $80.7, and attempt to force an early rebound. But SOL price could slide towards $75, if the bears overturn that that buy-wall, as predicted. 

On the upside, the bulls could invalidate this prediction if they successfully force a rebound above $95. However, as highlighted above, the 20-day SMA at $95, could pose a major resistance, as investors holding unrealized losses over the last 20-days could begin to sell once Solana price approaches their break-even point.