The daily chart of Solana shows a large dome formation, with a significant decline in on-chain TVL and stablecoin supply. The dual pressure from both technical and funding aspects may drive SOL to fall towards $120.
Review of current market sentiment and trends for SOL
Solana (SOL) has been continuously falling recently, attracting widespread attention from investors. According to the latest analysis from Crypto.news, SOL has been on a significant downtrend since September. This decline is not sudden, but rather the result of accumulated multiple pressures: weakening technical aspects, outflow of funds on the chain, and liquidity contraction, among other factors.
Dome Shape: Potential Reversal Signal
On the daily chart, SOL is forming a large bearish dome pattern. This pattern is a classic reversal signal, indicating that bulls are gradually losing control at high levels, buying pressure is gradually declining, and selling pressure may be further released.
Death Cross and Weak Momentum
Not only is there a dome pattern, but the technical aspect also faces more serious risks. Analysis indicates that the 50-day simple moving average is expected to form a death cross with the 200-day SMA. Although the death cross is a lagging indicator, in the context of the current dome pattern and capital outflows, it is seen as a potential signal for a significant pullback. Buyer momentum is weakening, and the market may enter a deeper correction.
The scale of DeFi ecosystem funds has shrunk.
From an on-chain fundamental perspective, Solana’s DeFi protocol’s Total Value Locked (TVL) is significantly declining. Crypto.News reports that its TVL has fallen from the highs of several months ago. TVL is an important indicator of ecological vitality, user stickiness, and capital utilization. Once TVL shrinks significantly, it means that capital is withdrawing from the ecosystem, posing a substantial threat to the network’s prospects.
Concerns about the decline in stablecoin supply
Another concerning phenomenon is that the supply of stablecoins on the Solana network is also decreasing. Analysis indicates that this decline is about 20% from the year’s peak. Stablecoins are often an important bridge in the DeFi ecosystem, and their reduced supply may reflect weak liquidity, declining risk appetite, or even that funds are seeking refuge in other chains or assets.
ETF entry but unable to stop fund withdrawals
Despite several institutions launching Solana spot ETFs (such as Bitwise, Grayscale, VanEck, Fidelity, etc.), this influx of funds has temporarily failed to reverse SOL’s downward trend. In other words, while institutional buying is a positive factor, the current strength is not strong enough, lacking sustained support, and is difficult to offset the outflow pressure of on-chain capital.
Stress Test: What Happens if it Breaks $120?
Technical analysts warn that if SOL falls below the key support level of $120, it could trigger a deeper pullback. If the $120 level is breached, the next potential target range may be around $95. This is not only a technical downturn but could also trigger market panic, further increasing selling pressure.
Practical strategies and focus points
- Day traders: It is advised to manage risks well. If the price approaches around $120, consider taking partial profits or using stop-loss strategies.
- Medium to long-term investors: You can gradually allocate into SOL, but it is recommended to keep some cash or stablecoins to cope with potential deep corrections.
- Continuously monitor on-chain data: Focus on indicators such as TVL, stablecoin supply, and the pace of capital inflows into ETFs, as these are important signals for future operations.
- Psychological Preparation: In the current phase of high volatility and upward risks, investors should maintain a calm mindset and not be swayed by short-term fluctuations and panic.
* The information is not intended to be and does not constitute financial advice or any other recommendation of any sort offered or endorsed by Gate.
