Solana (SOL), a leading altcoin, experienced a remarkable price surge from early November to early December, soaring by 500% to reach $125.65. This peak was followed by a struggle to maintain momentum, leading investors to question whether the rally had come to an end.
Recently, SOL has been on a downward trend, closing with losses over three consecutive days and currently trading around $105.80, marking a decline of over 16% since the beginning of the week. This pullback follows a 12-week buying frenzy that has now seen a reduction in trading volumes and excitement.
Technically, Solana’s Relative Strength Index (RSI) had reached overbought levels in mid-December, indicating an impending correction. The RSI has now retreated to around 65, suggesting that the price could find support around the psychologically significant level of $100. If the downtrend persists, SOL might find support near the $75 level, aligning with its 50-day Exponential Moving Average (EMA).
In the wake of SOL’s price decline, Binance’s altcoin BNB reclaimed its fourth position in market value. SOL’s daily spot trading volume also took a hit, indicating investors are reassessing their positions in the altcoin.
While Solana struggles to regain momentum, its main competitor, Ethereum (ETH), has started to gain traction, rising over 7% in recent days to around $2,3450, outperforming SOL during the same period. This has resulted in a sharp decline in the SOL/ETH trading pair, suggesting a capital shift from SOL to ETH, raising questions about Solana’s ability to maintain its strength during Ethereum’s recovery.
According to DeFiLlama, the Total Value Locked (TVL) in the Solana network has also been declining since December 26th, with a drop of approximately $100 million. This decrease in TVL adds pressure on the altcoin as it implies more SOL is available in the market, potentially increasing selling liquidity and hindering price growth.