Solana Bearish Momentum continues as SOL eyes $127

Solana remains one of the crypto assets that is performing below expectations. At the moment the altcoin is showing strong bearish momentum. At the end of August SOL had one of the worst weeks of 2024. In fact, it had the second-worst weekly return of the year with a negative ROI of 19.14%. Previously, its highest negative ROI was 25.19% that occurred in July.

The cryptocurrency continues to face strong downward pressure as its price aims at closing below $127.00. Already, on 4 September the SOL price dropped to $123.45 before rebounding to $129.60 a few hours later. The following graph shows the SOL daily price chart. 

SOL Daily Price Chart – CoinGecko

As the image shows, the SOL price sharply dropped before making a strong and immediate retracement. In the last 7 days the coin lost value by 12.1% showing the high bearish momentum. At the time of writing SOL is trading at $128.01 SOL/USDT at Gateio. In fact, the entire crypto market is experiencing much bearish pressure.

Several metrics confirm Solana’s continued bearish outlook. For example, its funding rate turned negative while its open interest (OI) rose by 20%.  The rise in OI during periods of downward pressure indicates that there is much short-selling from futures traders. The next graph shows the changes that occurred in SOL OI.

SOL Open Interest, and Funding Rate – Velodata

As the picture shows, the funding rate is negative which shows that the bearish bias will likely continue. During that period the funding rate was at its worst for 2024. It was standing at -0.001. More significantly, this metric had been negative for a number of weeks now. In August the cryptocurrency had a negative spot net flow of $500 million. It seems that the Solana derivatives are currently influencing the price of the coin.

The declining in meme coin on the Solana network might be contributing to the on-going bearish pressure which the various metrics are showing. The SOL trading volume has been decreasing within the last few weeks as the graph shows.

Solana DEX volume chart – Dune Analytics

During the last week of August, for example, there was a $7.7 billion decrease in SOL DEX volume. That was the greatest change in trading volume within the last 6 months. 

Despite the sluggish SOL price performance its NFTs were faring well. For example, the NFT sales volume rose by 2.7% to reach $18 million. The number of NFT buyers and sellers also rose by 40% and 27%, respectively. Such a development shows the potential that the Solana network may have a resurgence in September.

Solana Retests $127: The Chance of SOL to Reach $100

There are strong indications that the SOL price may drop below $127, the next strongest support level. In the past the cryptocurrency even dropped below $120 more than 6 times since April this year. If its price falls below $127 the next support floor will be $110. However if the bulls fail to push back the price SOL will slide below $104 before dropping to $98. Looking at how things are going there is a need for a strong SOL upward price trigger.

Possible Triggers for SOL Price Rally 

As we know, in 2023 SOL had a strong price rally that started in October. A number of factors influenced the SOL price to rise. For example, the expectation of the launch of the spot bitcoin ETFs in the United States influenced the bitcoin price to surge. However, that also created a bullish momentum for the entire crypto market.

The other factor that helped to create a bullish SOL outlook were several developments that were taking place on the network. For instance, the team was working to overcome the downtime problem the network was facing. As of now, there are a number of factors that may trigger the Solana rally.

First, the outcome of the Federal Open Market Committee (FOMC) earmarked for 18 September can give the crypto market a boost it requires to rally. The market expects that the committee may resolve to cut interest rates by up to 50 basis points. If that occurs there will be more money inflow into risky assets like cryptocurrencies. If a market wide rally happens SOL will also benefit.

Also, the United States employment data that will be released on 6 September may influence the market positively resulting in a rally. There is a high likelihood that the US unemployment for August may rise from 114, 000 in July to around 162,000 for August. However, analysts anticipate the monthly unemployment rate to fall from 1.43% to about 1.42%. These statistics help to gauge the health state of the country and will also influence the Federal Reserve’s interest rates decisions. If the job market cools off that may boost the crypto market sentiment. This is because the central bank may introduce accommodative monetary policies.

Regulatory changes in leading economies such as the United States will also have an effect on prices of cryptocurrencies. If the U.S, for instance, introduces positive regulatory policies during the period the crypto market may respond positively.