As the broader crypto market pulled back, Solana (SOL) erased its recent gains despite strong institutional demand for cryptocurrency-based investment products. Some analysts have now suggested that the altcoin is risking a deeper pullback similar to its 2022 correction.
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Solana Loses Mid-Week Gains As Market Volatility
On Friday, Solana fell 7% intraday to retest the $84 area, giving back most of its weekly gains. The cryptocurrency has been trading between $78-$88 since the beginning of the February crash, trying to break out of your territory but ultimately failed.
Amid continued market volatility, fueled by the US-Israel war with Iran, the altcoin jumped 13% on Wednesday, reaching a multi-week high of $94.05 before settling in the $88-$92 range.
Market watcher Trader Tardigrade confirmed that Solana could target the $100 barrier if the breakout is confirmed. He noted that the cryptocurrency is retesting the rest of the consolidation range as support, which could form the basis for a move to higher levels.
However, the price of SOL has now returned to its one-month accumulation range after failing to hold the exit level on Friday morning. Rekt Capital observed that the broader market conditions are similar to Bear Market behavior, which may suggest that Solana is preparing for a deep correction.
According to the analysis, the altcoin has historically deviated below the historical support of $123.28 while losing in the month-long period. In 2022, after losing this level, SOL produced a deviation below it and traded below the psychological level of $99.06 before refusing to move from this area.
Therefore, a new monthly close below both $123.28 and $99.06 would indicate that these levels have officially been lost as support. However, it also opens the door for a rally back to them to retest them as resistance, such as 2022.
A shallow pullback could lead to an immediate rejection of the $99.06 region, he explained. At that point, a strong support rally could allow Solana to revisit the $123.28 level before deciding whether further bearish continuation follows.
SOL ETFs ‘Defy Physics’
Despite the recent price drop, experts emphasized the positive sentiment shown by traditional investors in Solana, as evidenced by the performance of investment products that track the price of the altcoin.
In Post X, Eric Balchunas, Bloomberg Intelligence Senior ETF Analyst, emphasized that although the price of cryptocurrency is currently 57% down since its Exchange-Traded Funds (ETFs) were launched for the first time in July, the category has accumulated $1.5 billion in flow and “they don’t really give anything.”
He noted that part of that revenue comes from institutional investors, which he considers a “significant investor base” and “really good signs” for the sector’s future.
“In reality/history ETFs that start in that kind of decline are close to impossible to get income from. Many wouldn’t even make it for a year or two if they dropped 57% in the first six months. Time is of the essence. Solana is defying physics here,” he explained.
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Additionally, he gave a broader perspective on adjusting SOL’s $50 billion market cap to Bitcoin’s (BTC) $1.4 trillion cap. As he elaborated, Solana ETFs saw the equivalent of $54 billion in new net inflows, almost double what Bitcoin ETFs received in the same period after launch, when BTC was in an uptrend.
However, it’s worth noting that the category experienced its first negative day in more than a month on Thursday, with an outflow of $5.23 million, according to SoSoValue data.
Featured image from Unsplash.com, Chart from TradingView.com
