Solana [SOL] has fallen victim to the prevailing bearish sentiment in the wider cryptocurrency market, experiencing a 5.39% decline over 24 hours to reach $217 at the current moment. Its market capitalization briefly dipped below $100 billion for the first time in three weeks.
The increased volatility observed over the last day coincides with a surge in liquidations in the derivatives market, resulting in significant losses for Solana bulls.
Record Highs in Solana Long Liquidations
Data from Coinglass indicates that on December 10th, total liquidations for leveraged long positions on Solana amounted to $57 million. This represents the highest volume of SOL long liquidations in over five months.
The surge in long liquidations typically triggers selling pressure, leading to a decline in Solana’s value. However, this wave of liquidations may have helped clear out excessive leverage surrounding Solana, potentially paving the way for a recovery of the altcoin.
Nevertheless, there are still additional liquidation clusters below the current price level. Failure on Solana’s part to rebound from the current bearish trends and a subsequent drop to these levels could result in further downturns.
Bearish Trend Evidenced by Rounded Top
Solana has also formed a rounded top pattern on its shorter timeframe chart, indicating a prevailing bearish control. The neckline of this pattern is situated at $215, a level that SOL has tested multiple times.
A failure to hold this support and subsequent decrease could trigger a drop below the $200 mark to $183, sparking more long liquidations.
With an RSI value of 30, Solana is trending towards being oversold. While this may spark some recovery, a sustained upward movement will only materialize if the RSI line crosses above the signal line.
The Awesome Oscillator (AO) reinforces the bearish momentum through its red histogram bars, confirming Solana’s current downtrend.
Is a Further Decline in SOL Likely?
These bearish signals indicate that SOL could face additional declines unless there is a shift in buyer sentiment.
Traders are advised to monitor any potential drop below the rounded top neckline at $215, as this could accelerate the downward trend. Furthermore, a drop below $200 could amplify the pressure on buyers due to increased long liquidations.
Coinglass’s liquidation map for Solana highlights the significant concentration of long liquidation leverage below the $200 mark. Forced closures of these positions could lead to further downward movements.