Solana [SOL], despite being an oversold top altcoin, experts view its 30% pullback as a buying opportunity. Despite the overall market cooling recently, network activity on the Solana [SOL] blockchain remains strong. Previous market enthusiasm faced bearish pressure in November and early this month. Currently, SOL's daily RSI (Relative Strength Index) has fallen to its lowest level since mid-2023, providing ideal timing for investors to gradually enter the altcoin market. Notably, Solana has seen a recent surge in activity, operating normally. It is also worth mentioning that the network's TVL (Total Value Locked) has just reached a new high for 2024, hitting 55.37 million SOL. Given the volatility of SOL prices, measuring TVL performance in SOL rather than USD is more appropriate.
The growth of TVL often reflects long-term optimistic expectations and a thriving network activity. Despite a slight downturn in market sentiment recently, Solana's on-chain transaction volume remains high, with an average daily transaction volume exceeding $3 billion over the past two days.
Solana's transaction data further reveals the continued growth of network activity. The number of transactions has been steadily rising for months, peaking at 67.77 million transactions (TXS) in the past 24 hours, setting a record high for the past 11 months.
Can $180 be maintained?
Since peaking in November, SOL's price has fallen from $264 to a low of $175. However, this pullback has reached a critical support area, and if it can stabilize here,
Since entering 2024, SOL has experienced sell-off reversals whenever it touches the 100-day EMA (the blue line representing the exponential moving average). This pattern has recurred in June, July, and October.
As of the time of writing, the recent pullback has found stable support at the $175 moving average. Coincidentally, this price level aligns with the golden ratio level (61.8%) in the Fibonacci retracement tool, calculated based on September's low.
Typically, price trend reversals often occur at levels corresponding to the golden ratio. Therefore, if this pattern repeats, SOL's price may touch the $175 low, with the possibility of further decline to $160.
However, despite the overall market sentiment being pessimistic toward SOL, this may be a worthwhile opportunity for long-term investors looking to enter SOL at a discount.
It is also worth noting that since November, market sentiment for SOL has turned negative for the first time.
So, in the context of the current critical support level and weak sentiment, what position is the market in?
According to data from Coinglass, over 82% of top traders on Binance currently hold long positions in SOL.
Although this is a slight decrease from the 84% level on December 19, it indicates that most players are still optimistic about SOL's recovery prospects.
Is SOL ready for a strong return?
The recent surge in network activity may indicate an organic demand spike for Solana's native cryptocurrency. However, the overall market has performed poorly, especially over the past week, and Solana's native cryptocurrency has not been spared.
Last week, SOL experienced a sharp fluctuation from its peak to its low, dropping as much as 23%, but this process also allowed it to retest an important support area. The price has been fluctuating between the 0.5 and 0.618 Fibonacci retracement levels, calculated based on the lows in September and the highs in November.
In the recent downturn, the RSI indicator nearly reached the oversold zone, which may indicate further downside risk for prices in the coming days. However, at the time of writing, prices have shown some signs of weakening bearish momentum.
If SOL hopes to rebound from its current Fibonacci range, traders should closely monitor some positive signals. So far, although bearish momentum has slowed down, the cash flow in the spot market remains negative. However, it is worth noting that the intensity of cash outflows has weakened over the past four days.
A decrease in spot outflows may pave the way for recovery. However, the derivatives market also indicates that SOL may not yet be ready for a strong return.
In the past two days, the weighted financing rate for open contracts has been negative. This is the first time SOL's financing rate has been negative in the past six weeks.
But please note that Solana's financing rate has begun to show signs of recovery in the past 24 hours.