Outages on the network and decreasing smart contract reserves contribute to further downward pressure on the SOL price.
The stock price of Solana (SOL) is approaching a decisive breakdown moment as it nears the apex of its prevailing “descending triangle” pattern.
SOL’s 40% price decline setup
Furthermore, SOL’s price has been consolidated within a range defined by a falling trendline resistance and horizontal trendline support, which appears as a descending triangle, which identifies a continuation of a trend.
Due to SOL’s downward trend, which is down about 85% from its peak of $267 in November of 2021, it is more likely to break below the triangle range.
In general, the formation of a descending triangle following a breakdown move could last until the price has declined by the maximum height of the triangle. Accordingly, SOL’s bearish price target for June is $22.50, a drop of about 40% from the June 10 closing price.
According to a study conducted by Samurai Trading Academy, not all descending triangles lead to breakdowns. Based on the pattern’s history, the probability of a descending triangle setting reaching its profit target is seven out of ten.
The odds of SOL avoiding a breakdown and rebounding are roughly 30%.
Solana’s rebound scenario
A descending triangle forming during a downtrend but still leading to a price reversal marks the bottom of the bearish cycle for the asset.
Assume that SOL remains above the triangle’s horizontal trendline support. When the SOL/USD pair breaks above the structure’s falling trendline resistance, the pair could rise by up to its maximum height, putting its upside target around $65, an increase of about 72% from June 10’s price.
SOL’s 50-day exponential moving average (50-day EMA; red wave) coincides with the bullish profit target of the descending triangle.
Furthermore, SOL’s daily relative strength index (RSI), which has reversed from its oversold threshold of 30 since May 12, also bodes well for the token’s upward movement.
Solana TVL drops 75% from peak
The fundamentals of Solana are mixed.
Due to repeated outages, it had performed poorly as a blockchain network in recent months. Data from Defi Llama indicates that the total value locked (TVL) inside Solana’s smart contracts has fallen to $3.69 billion, down 75% from its December 2021 high of $14.83 billion.
According to a study published by James Trautman, a researcher at U.S.-based crypto analytics firm Messari, Solana saw sustained growth in network usage, developer activity, network infrastructure, and overall ecosystem in the first quarter of 2022.
An excerpt reads:
“SEVERAL FACTORS CONTRIBUTED TO THE Q1 RESULTS, INCLUDING THE CONTINUED GROWTH OF NEW NFTS AND NFT MARKETS, DIVERSIFICATION OF TVL, IMPROVEMENTS IN UX AND NEW APPLICATIONS ACROSS SEVERAL SECTORS OUTSIDE OF DEFI.
Earlier this month, Solana’s venture capital arm announced a $100 million investment and grant fund in order to support the development of blockchain-based software in South Korea, a country whose cryptocurrency sector has recently been impacted by the collapse of Terra (originally LUNA, now, a $40 billion “algorithmic stablecoin” project).
Developers who wish to migrate their projects from Terra to Solana will be attracted by the decision, which could increase demand for SOL.
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