Solana (SOL) dipped to a two-week low at round $35.50 on July 26, mirroring downside moves elsewhere within the crypto market. Nonetheless, the technicals counsel that Solana’s worth flirts with the prospects of rising 40% in August.
SOL hits key inflection level
Sarcastically, the bullish setup for Solana emerges out of a traditional bearish continuation sample.
On the every day chart, SOL’s worth has been consolidating inside what appears to be a “bear flag,” a technical pattern that develops during a downtrend and gets resolved after the instrument exits it with further price drops.
The so-called bear flag breakdown has not happened yet. Instead, SOL has been holding the lower trendline as support, raising possibilities of a sharp rebound toward the upper trendline, as illustrated in the chart below.
The rebound setup exposes SOL to a potential rally toward $49.50 in August, up 40% from July 26’s price. The $49–$50 level had served as both support and resistance in May.
Solana network performance still a concern — researcher
The potential bear flag rebound will serve as interim relief to Solana bulls, given SOL’s overall bias remains skewed to the downside.
Macro forces such as the Fed’s hawkish monetary policies and the collapse of the $40 billion “algorithmic stablecoin” project Terra (LUNA) — now renamed Terra Traditional (LUNC) — have despatched the crypto market right into a tailspin. In consequence, Solana, like some other dangerous asset, has suffered declines throughout its monetary and community utilization metrics in 2022.
As an illustration, the common variety of every day transactions atop the Solana blockchain plunged by 17.6% in Q2/2022 versus the earlier quarter, according to knowledge from Messari.
In the meantime, Solana’s income dropped 44.4% quarter-on-quarter (additionally due to recurring community outages).
“As seen in 2021 and all through Q1 and Q2, degraded community efficiency decreases community utilization and reduces the community’s continued circulate of income,” famous James Trautman, a researcher at Messari, including:
“If Solana had been to proceed to expertise degraded efficiency that lasts for a cloth period of time, a ensuing drag on basic utilization might catalyze volatility and drag on community worth.”
Bear flag breakdown?
The combo of macro and network-related issues danger triggering the bear flag breakdown by September.
SOL’s decisive shut beneath the flag’s decrease trendline means extra draw back is more likely to the $21–$23 area, in keeping with the technical setup illustrated beneath.
In different phrases, a 35%–38% drop from present worth ranges.
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