Solana opened trading at $234 and saw notable buying pressure early into Tuesday. It surged to a high of $243 but faced massive rejection after peaking.
The altcoin is on the verge of testing the $220 support for the second time this week. The first time it tested the mark was during the previous intraday session when it had one of its biggest single-day declines. It dipped from $242 and rebounded at $220. The bulls started buyback following the declines, pushing it closer to its opening price.
Monday’s decline is a continuation of Sunday’s bearish trend that saw it break the $250 support. The altcoin lost over 6% during this session as several memecoins experienced massive dips.
Solana is marking its third day of consecutive declines. It has been down by over 12% during this period and shows no signs of recovery.
Why is Solana Retracing?
SOL hit fresh lows following its previous massive increase. The declines started after it attained a new all-time high on Jan.19. The coin surged from $261 to $195 after breaking its previous ATH at $270. After attaining the milestone, it faced massive corrections as traders took profit.
The one-day chart reveals that the declines started when the asset broke above the bollinger band. An asset breaking above this metric indicates peak buying pressure. Corrections are almost inevitable. The ensuing downtrend tells the whole story.
It is also worth noting that the Sunday surge triggered another indicator: the relative strength index. RSI broke above 70, making SOL overbought. As with the bollinger band, an overbought asset is due for corrections. The downtrends worsened as the crypto market saw massive outflows on Monday. It has yet to recover, and the bearish sentiment remains.
Investors are losing faith in Solana’s long-term prospects as they remove their investments from its ecosystem. Data from DeFiLlama reveals that the total locked value dropped from 51.8 million SOL a few days ago to 46.3 million SOL at the time of writing.
Data from Solscan shows a drop in trading volume in the ecosystem. It dropped from $28. billion on Jan. 23 to $18.6 billion Monday. The decline follows the massive losses in prices across several memecoins
A closer look at the one-day chart shows the bulls defending the $220 support. However, indicators hint at the asset slipping below the mark.
A Bearish Convergence
The moving average convergence divergence displays a complete bearish interception. Notable price declines followed previous negative interceptions. The latest may be no different as the histogram associated with MACD prints its first red bar in more than ten days.
The coin’s surge above the Bollinger band is still in play. Previous price movements reveal that the altcoin dipped close to the lower band after the event. If the bulls fail to restart the uptrend, Solana may lose the $220 support and $200 barrier. The Fibonacci retracement supports this claim, as SOL trades above the 61% Fib mark. Further descent will send the price as low as the 78% level at $203.
Solana first lost the $220 mark in December and remained rangebound afterward. Prices bounced between $202 and $175 for almost two weeks before breaking out. It lost the mark again on Jan. 6 and remained rangebound for nearly a week before breaking out.
If SOL loses the critical level, the same trend may play out. It may revert to its $200-$180 movement.
