Solana (SOL) is approaching a decisive breakout moment as it is nowhere near reaching the apex of its prevailing ‘descending triangle’ pattern.
Configuration for the drop of 40% of the price of SOL
In particular, SOL price has been consolidating within a range defined by descending trendline resistance and horizontal trendline support, which looks like a descending triangle, a popular continuation pattern.
Therefore, since SOL has been trending down, down around 85% from its high of $267 in November 2021, its probability of breaking below the triangle range is higher.
As a rule of technical analysis, a breakout move followed by the formation of a descending triangle could last until the price has fallen as far as the maximum height of the triangle. This places SOL’s bearish price target at $22.50 in June, 40% lower than the current price.
But not all descending triangles lead to dips, a study by Samurai Trading Academy suggests. Specifically, the probability of a descending triangle setup hitting its profit target is 7 out of 10, based on the history of the pattern.
So that leaves SOL with about a 30% chance of avoiding a fall and recovering.
Scenario for Solana price rebound
Descending triangles that form during downtrends, but continue to lead to price pullbacks, often mark the bottom of an asset’s bearish cycle.
Suppose SOL remains strong above the support of the horizontal trend line of the triangle. The SOL/USD pair could then break above the downtrend line resistance of the setup, and rally to its peak, putting its upside target around $65, 72% higher than the Actual Price.
The profit objective of the descending triangle also coincides with the SOL 50-day EMA (50-day EMA – the red wave) near $59.
Meanwhile, SOL’s daily Relative Strength Index (RSI), which has been reversing from its oversold threshold of 30 since May 12, also fuels the bullish outlook for the token.
Could go up, could go down vibes
great analysis bruh pic.twitter.com/q6VCBsTXJL
— Posty (@PostyXBT) June 10, 2022
Solana’s TVL drops 75% from its peak
Meanwhile, Solana’s fundamentals are not showing any clear signs.
As a blockchain network, it had been performing poorly in recent months due to several consecutive crashes. While the total value locked (TVL) within Solana smart contracts has plummeted to $3.69 billion, down 75% from the all-time high reached in December 2021 of $14.83 billion, data from Defi Llama shows. .
On the bright side, Solana saw sustained growth in network usage, developer activity, network infrastructure, and the overall ecosystem in the first quarter of 2022, according to a study by James Trautman, a researcher at American cryptocurrency analytics firm, Messari.
Excerpts from the study say:
“Several factors contributed to Q1 results, including continued growth in new NFTs and NFT markets, TVL diversification, UX improvements, and new applications in various sectors outside of DeFi.”
On June 8, Solana’s venture capital arm launched a $100 million investment and grant fund to support its blockchain-based products in South Korea, a country whose cryptocurrency sector is hurt by the recent collapse of Terra, an “algorithmic stablecoin” project that was valued at $40 billion.
The decision is expected to attract developers who want to migrate their projects from Terra to Solana, which could lead to increased demand for SOL.
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