Solana Tests 2022 Lows As TVL Drops to $7 Billion

Solana has recently moved to new lows near the $81 level as TVL (total value locked) declined to multi-month lows.

TVL Declined by More Than 50% From December 2021 Highs

According to data from Defi Llama, Solana TVL reached highs near the $15 billion level but lost momentum and declined towards the $7 billion level. A move below this level will likely trigger a sell-off in SOL.

Other projects are in better shape. Ethereum TVL retreated from $160 billion to $114 billion, while Terra TVL declined from $21 billion to $15 billion.

The broad decline in TVL was triggered by the decline in crypto markets, as the total crypto market cap moved from the $3 trillion level towards the $1.6 trillion level.

However, Solana showed additional weakness and lost market share to its competitors, which is a bearish sign.

Momentum is extremely important in the crypto world as multiple projects are trying to gain “critical mass” at the same time. It’s a race, and the projects which will attract the most TVL will have staying power, while their less successful peers may face oblivion.

In this light, traders should closely monitor Solana TVL to see whether it manages to hold above the $7 billion level. A move below this level will indicate that SOL will remain under pressure.

The Technical Picture Remains Bearish

SOL continues to trend lower in a broad downside channel, and it has recently reached an important support level at $81.

This support level is located near the highs of the August 2021 consolidation, which was followed by a major rally.

If SOL manages to settle below the $81 level, it will likely gain strong downside momentum and trend towards the lower end of the current downside channel. As this channel is wide, SOL’s move may be strong.

As I mentioned above, traders should also monitor the developments in TVL, which may trigger action in SOL. In addition, total crypto market cap action will also need monitoring.