Following a 5% decline in its market value, Solana [SOL] is currently positioned near a critical support area that has historically been a catalyst for significant rebounds towards the $250-$260 range, signifying a potential 35% increase from its present price.
In the past, this support zone has initiated robust recoveries, and now, with a 65% surge in trading volume exceeding $2 billion, traders might anticipate a replication of previous patterns.
Furthermore, the SOL/BTC pair is showing resemblances to a similar trend observed in the previous cycle, where a bullish reversal drove Solana up by 65% to $270 within a two-week period. Notably, the excitement generated by the TRUMP memecoin launch had a considerable impact, resulting in a 19% jump in Solana in a single day.
While a 35% rebound might align with Bitcoin’s consolidation, the buzz of altcoin season, and substantial trading volume supporting it, it remains premature to make a definitive call.
It is necessary to monitor whether the market stabilizes at a firm bottom before both retail and speculative investors fully engage in the market correction.
Solana Faces a Dilemma: Will it Rebound or Experience Further Declines?
As of the time of writing, Solana is witnessing significant buying interest in futures trading, with Open Interest (OI) climbing by 8.37% to $5.85 billion.
Approximately $14 million in long positions were liquidated within 24 hours, corresponding with a 2.65% decrease in SOL’s price. Despite the liquidations, Solana remains heavily leveraged, with traders taking considerable risks in anticipation of a potential recovery.
Nonetheless, as highlighted by CryptoCrypto, this strategy could prove counterproductive if the flourishing demand for spot trading fails to materialize. Data from Binance reveals three consecutive days of dominant sell orders.
Unless there is a shift towards buying activity, reaching a $180 floor might pose challenges. A retracement to $160 is deemed more probable if unchecked long positions trigger significant selling pressure.
Given the prevailing high-risk stance in the derivatives market, exercising caution is imperative.
Despite the widespread speculation about a potential 35% upswing to $250 circulating on social platforms, the current scenario hints at prolonged periods of substantial liquidations.
Traders are at risk of incurring significant losses, suggesting that any potential recovery for Solana remains distant.