Solana Drops Below $20, Any Further Losses Ahead?

Posted: September 6, 2023

Disclaimer: The information presented does not constitute financial, investment, trading or other advice and is solely the opinion of the author.

• Solana dropped below an HTF demand zone at $20.
• The price action indicated strong bearish intent, and a move towards USD 17 seemed likely.

Solana [SOL] had formed a short-term range between $20 and $22.2 in the second half of August. However, recent selling pressure has caused the bulls to relinquish control of this support zone to the bears. This did not bode well for long-term investors as another 12% decline was on the way.

Realistic or not, here is the market cap of SOL in terms of BTC

Questions were raised about Solana’s network stability when MakerDAO [MKR] considered the former his favorite blockchain. In this regard, says co-founder Rune Christensen tweeted that the technical quality of the Solana codebase was what New Chain required.

The failure to defend the weekly order block signaled by SOL is going down, but will we get a retest first?

Source: SOL/USDT on TradingView

The $20-$22 zone, delineated by the red box, represented a former bullish order block from the weekly time frame for SOL. On August 31, a 12-hour trading session closed under the order block, meaning the bears had won this battle. This meant that the range formation was also defeated.

The RSI and OBV indicated selling pressure and downward momentum. It was possible that SOL would see a rise to retest the order block as a bearish breaker block, but such an uptick was not a necessity.

Like bitcoin [BTC] dropped to $24.8k or lower, it could quickly drag SOL south. It can be difficult for traders to position themselves for such a scenario.

On the other hand, a retest of the $20-$22 area could provide a more ideal entry for short sellers, targeting the 23.6% Fibonacci extension level at $16.94.

Market sentiment remained in favor of sellers as most speculators remained sidelined

Source: Coinalysis

How much are 1,10,100 SOLs worth today?

Open Interest has been relatively flat for the past two weeks as SOL fell to the $20 support level. Millions of dollars poured into the futures market as SOL bounced towards the $21.5 level on Aug. 29.

But since then sentiment has changed. In the late hours of Sept. 4, SOL fell from $19.5 to $19.2 and Open Interest rose, indicating short selling activity. The spot CVD has also slowly declined over the past week, although funding rates have been positive.