In a technical analysis, renowned crypto analyst Gert van Lagen presented an extremely bearish outlook for Solana (SOL), suggesting that the price is poised for a substantial downward move. Van Lagen’s analysis is supported by the widely acclaimed Elliott Wave Theory, a methodology that attempts to identify recurring patterns and cycles in market price movements.
Why the Solana price could crash
The core of Van Lagen analysis is a dissection of Solana’s price action over the past few years. By his assessment, the year 2021 marked the peak of a pure Elliott Wave trend for Solana, marking the end of a bullish cycle. This uptrend is characterized by a specific five-wave pattern, with the last wave acting as a climax before a reversal.
Heading into 2022, Van Lagen’s analysis identifies the development of the A-wave downwards, which he classifies as the first leg of a prolonged bear market. Crucially, this A-wave downwards shows a clear pattern of five sub-waves, in line with the principles of Elliott Wave Theory. The presence of these sub-waves is a key indicator that the downtrend is likely to continue as they are believed to reflect underlying market sentiment and psychology.
Related reading
In 2023, Van Lagen observed the formation of the B wave, a corrective rally within the broader bear market context. Like the A wave, this B wave consists of five sub-waves, which follow the Elliott wave pattern for corrective moves. The identification of this B wave is critical as it indicates that the overall downtrend has not yet been fully exhausted and further downside momentum may be building.
As the analysis shifts to 2024, Van Lagen expects the C wave to become a reality. In the Elliott Wave Framework, the C wave is the final part of the broader bear market cycle, and its occurrence could potentially mark the completion of the ongoing downtrend for Solana.
Interestingly, Van Lagen’s analysis also highlights the presence of bearish divergence on the weekly Relative Strength Index (RSI), a widely used momentum oscillator. Bearish divergence occurs when price reaches higher highs while the RSI fails to confirm these highs, potentially signaling an upcoming trend reversal or loss of bullish momentum.
Related reading
Van Lagen posted via X: “I’m short on SOL -> ready for the next stage. 2021: A clean Elliottwave completed; 2022: A downward wave of long-term bear market <- 5 sub-waves; 2023: B-wave of long-term bear market <- 3 sub-waves; 2024: The C wave is expected to decline. Bearish divergence on the weekly RSI.”
In particular, the analyst refrains from specifying an exact price target. However, the blue arrow on the chart indicates that Van Lagen expects the SOL price could fall to around $13. Such a drop would mean a dramatic price crash of more than 90% from current price levels.
A 50% chance of this happening
In his commentary, Van Lagen acknowledged the risks associated with his short position on Solana, characterizing it as a ’50/50 trade’ and ‘ballsy’. However, he defended his decision, saying it is backed by a “good theoretical framework” and serves as a hedge against his long positions in other assets. The analyst emphasized the importance of analyzing the isolated chart without emotions, underscoring the need for objectivity in technical analysis.
“Short on SOL is a 50/50 trade, with balls, but also a hedge against my long positions. There is a good reason to do this if you look at the isolated graph without emotion. It is a risky transaction and I am aware of it. But also supported by a good theoretical framework,” he says declared.
While Van Lagen’s analysis presents a bearish outlook for Solana based on Elliott Wave Theory, it is critical to recognize that the broader crypto market often moves in tandem with Bitcoin. This correlation raises questions among other market participants. One user summed up this sentiment by saying: “This is really strange. Do you think BTC will rise in the coming weeks, but SOL will fall? We are still in a market structure where major coins are not falling as much while Bitcoin is rising.”
At the time of writing, SOL was trading at $165.
Featured image created with DALL·E, chart from TradingView.com