The price of Solana (SOL) has recently seen a significant surge, crossing the $200 mark and hitting a three-year high of $225.21. This surge in Solana’s price has been fueled by the positive momentum of the cryptocurrency market in general and the increased demand for the layer-1 (L1) blockchain network.
However, with buying pressure easing and profit taking rising, Solana is starting to give back some of its recent gains. This suggests that a pullback below the $200 mark is likely now. How likely is this scenario?
Solana traders start taking profits
SOL is currently trading at $202.51, noting a 5% price decrease in the past 24 hours. It is worth noting that the trading volume has increased by 3% during the same period, highlighting the increase in selling pressure.
When the price of an asset falls while trading volume increases, it indicates an increase in selling activity as more market participants actively distribute their holdings. This combination of falling prices and rising volume indicates strong negative sentiment in the market.
This confirms that during the period under review, many SOL traders chose to sell rather than buy more. This pushed the price of the coin down as the selling supply overwhelmed the demand to buy it.
Moreover, the negative Balance of Power (BoP) indicator supports this negative outlook. This indicator measures the strength of buyers versus sellers in the market, and is at -0.43 at the time of publication. A negative BoP indicates that sellers are in control and are trying to push the price of the asset further down.
SOL Price Prediction: $193.92 is the base price level
Additionally, the rise in Solana’s funding rate suggests that the decline could continue below the $200 mark. At the time of writing, it has risen to an eight-month high of 0.037%.
The funding rate is a mechanism used in perpetual futures contracts to keep the contract price in line with the spot market price of the underlying asset. When the funding rate rises, it often indicates a significant imbalance in the market—usually with buyers in control. This is considered a bearish signal, indicating that prices will soon fall.
This happens because as the cost of holding long positions increases, some traders may choose to close their positions to avoid higher financing fees, which can create downward pressure on the price of the asset. Additionally, if the price of the asset starts to decline, highly leveraged long positions are at risk of being liquidated, which can create a cascading effect that can push the price even lower.
At press time, SOL is trading at $202.51, holding its support level at $193.92. An increase in selling pressure could push the price to retest this critical support. If the bulls fail to defend this level, it would confirm the downtrend, pushing SOL price further down towards $169.36.
On the other hand, a strong defense of this level could lead to a bounce, restarting Solana’s price rally. If this happens, the SOL bullish trend has the potential momentum to retest the three-year high of $225.21.
