The price of Solana (SOL) has experienced a sharp drop of 8.03% over the past 24 hours, marking its first drop below $200 since early November. This drop, coupled with broader market weakness, led to significant liquidation.
Despite the significant drop, it seems that Solana investors are predicting that the altcoin will quickly recover from its lows. Is this possible?
Solana Still Undervalued, Investors Hopeful
Solana’s price action is in line with our analysis from Bitcoinist on December 15, where we noted that the altcoin may struggle to stay above $200. In the article, we pointed out how bears overcame bull dominance when the price broke below the 20-day Moving Average (EMA).
With Solana below $200, one would expect traders to be cautious about betting on the price going up. But that’s not necessarily the case. According to Coinglass, Solana’s Long/Short ratio is rising. The Long/Short ratio shows whether traders expect the price to go up or down.
When this ratio is falling, it means that the average expectation is bearish. But now, the ratio is rising and is about to cross the 1 mark. This increase shows that Solana traders believe that the recent decline is only temporary.
Solana Long/Short Ratio. Source: Coinglass
This sentiment can also be related to the state of some indicators on the blockchain. One of them is the Market Value to Realized Value (MVRV) ratio. The MVRV ratio measures the returns in the market and indicates whether a cryptocurrency is undervalued or overvalued relative to its fair value.
Typically, a high MVRV ratio indicates high unrealized profits in the market. In this case, coin holders will be ready to sell as the cryptocurrency approaches a local top or market peak. However, a falling ratio indicates that profits are decreasing and is seen as an opportunity to accumulate.
According to Glassnode data, Solana's MVRV ratio is currently at 1.45, approaching undervalued territory. Historically, SOL's price has typically peaked at around 2.83.
Solana MVRV Ratio. Source: Glassnode
This decline in MVRV ratio indicates that SOL may be entering a potential accumulation phase. However, the recovery potential depends on the overall market situation.
SOL Price Prediction: Indicators Against a Rapid Recovery
Solana previously formed a bull flag pattern that suggested a potential move to $300. However, a look at the current daily chart shows that this outlook is no longer viable as the SOL price has slipped below the support line at $209.58.
Further, altcoin trading volume has continued to decline, with a heavy bias towards sellers. If this trend continues, Solana’s price could fall to $153.97, putting traders with long positions at a loss and reducing the likelihood of a quick recovery.
Solana Daily Analysis. Source: TradingView
Conversely, if the bulls prevent the token from falling below $170.75, a prolonged correction could be avoided. Solana could then recover from below $200, possibly rising to $264.66.
