The price of Solana (SOL) has plunged 8.03% in the past 24 hours, dropping below $200 for the first time since early November. The drop coincided with a broader market downturn, triggering mass liquidations.
Despite the sharp drop, Solana traders appear to expect the altcoin to quickly rebound from its lows. Or can it?
Solana is still undervalued, bulls are hopeful
Solana’s price action is in line with BeInCrypto’s Dec. 15 analysis, which suggests that the altcoin may struggle to sustain above $200. In the article, we cited how bears gained more dominance than bulls when the price fell below the 20-day exponential moving average (EMA).
With Solana trading below $200, one would think that traders would be cautious when betting on price increases. But that is not the case. According to Coinglass, the Solana long/short ratio is rising. The long/short ratio shows whether traders expect prices to rise or fall.
When the ratio is falling, it means that the average expectations are bearish. But in the current situation, the ratio is rising and is about to exceed 1. This increase shows that Solana traders believe that the recent decline will only last for a short period of time.
This sentiment may also be related to the state of certain on-chain metrics. One such metric is the market value to realized value (MVRV) ratio. The MVRV ratio measures the profitability of the market and shows whether a cryptocurrency is undervalued or overvalued relative to its fair value.
Typically, a high MVRV ratio indicates a market with significant unrealized profits. In this case, holders will be willing to sell as the cryptocurrency approaches a local or market top. However, a falling ratio indicates falling returns and is an opportunity zone for accumulation.
According to Glassnode, Solana’s MVRV ratio is currently 1.45, close to undervalued territory. Historically, SOL prices tend to reach market tops when the MVRV ratio reaches around 2.83.
Solana MVRV ratio.
The decline in the MVRV ratio suggests that SOL may be about to enter a potential accumulation phase. However, a potential recovery depends on the condition of the broader market.
SOL Price Prediction: Indicators Not Favoring a Quick Rebound
Solana had previously formed a bull flag pattern that hinted at a possible rally to $300. However, an evaluation of the daily chart today shows that this outlook has been invalidated as SOL price fell below the $209.58 support line.
Apart from this, the altcoin’s trading volume continues to decline, with the majority favoring sellers. If this trend continues, Solana’s price could drop to $153.97, leaving long position traders with losses and reducing the likelihood of a quick rebound.
Solana daily analysis.
Conversely, if the bulls prevent the coin from sliding below $170.75, an extended correction can be avoided. Solana is then likely to rebound from sub-$200 and potentially rise to $264.66.
