As the broader crypto market lags behind, Solana (SOL) erased its recent gains despite strong institutional demand for cryptocurrency-based investment products. Now some analysts have suggested that the altcoin is at risk of a deeper pullback like the 2022 correction.
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Solana misses average weekly returns as the market wobbles
On Friday, Solana fell 7% on the day to retest the $84 area, giving back most of its intraweek gains. The cryptocurrency has been trading between $78 and $88 since the early February crash, trying to break out of its local range but ultimately failing.
Amid ongoing market volatility stemming from the US-Israel war with Iran, the altcoin surged 13% on Wednesday to hit a weekly high of $94.05 before stabilizing in the $88-92 range.
Market watcher Trader Tardigrade confirmed that Solana could target the $100 barrier if a break is confirmed. He noted that the cryptocurrency is retesting the breakout zone of the consolidation range as support, which could form the basis for a move higher.
However, the price of SOL has now returned to its one-month accumulation range after holding the breakout level on Friday morning. Rekt Capital observed that broad market conditions resembled early bear market behavior, which could be preparing for a deeper correction from Solana.
According to the analysis, the altcoin has historically declined from the historical support of $123.28 when it was lost on the monthly timeframe. In 2022, after missing this level, SOL formed a deviation lower and traded above the psychological level of $99.06 before rejecting the area.
Therefore, a new monthly close below both $123.28 and $99.06 could indicate that these levels have officially been lost as support. However, it also opens the rally door for them to try again as resistance, such as in 2022.
A weak pullback could soon be rejected from the $99.06 area, he said. Meanwhile, a stronger support rally could allow Solana to revisit the $123.28 level before deciding whether to continue further down.
SOL ETFs ‘Defy Physics’
Despite its recent price decline, experts have highlighted the positive sentiment of traditional investors towards Solana, which is evidenced by the performance of investment products that track the price of the altcoin.
In a post at X, Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, pointed out that although the price of cryptocurrencies is currently 57% lower than when Exchange Traded Funds (ETFs) first launched in July, the streaming category has collected $1.5 billion and “really hasn’t paid any of it.”
He noted that half of those inflows came from institutional investors, which he sees as a “serious investor base” and a “really good sign” for the future of the category.
“In the reality/history of ETFs, it’s almost impossible to enter a downturn like this. Most don’t even last a year or two if they’re down 57% in the first six months. Timing is of the essence. Solana defies physics here,” he said.
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Additionally, he offered a broader perspective by adjusting SOL’s $50 billion market cap to the $1.4 trillion Bitcoin (BTC) cap. As he detailed, Solana ETFs saw the equivalent of $54 billion in net new inflows, nearly double what Bitcoin ETFs experienced during the same phase after launch, when BTC was in an uptrend.
However, it’s worth noting that the category posted its first negative day in over a month on Thursday with $5.23 million, according to SoSoValue.
Featured image from Unsplash.com, Chart from TradingView.com
