Solana (SOL) is facing a period of consolidation, with its price fluctuating between $87 and $77 in recent weeks. However, recent developments in the market suggest that cryptocurrencies may be at risk of significant decline.
A bearish pattern is emerging and a change in investor behavior could trigger a price crash, with losses of up to 38% possible if SOL falls below key support levels.
Growing Concern: Solana STH Profits
One of the key metrics that raises concerns about Solana is LTH vs. STH NUPL (net unrealized gains and losses for long-term holders vs. short-term holders). Since February, unrealized gains for short-term holders (STH) have been steadily increasing.
STH typically tends to sell as soon as it makes a profit, which can put significant selling pressure on Solana’s price. The lack of similar growth in returns across LTHs means there is less stabilization from long-term holders.
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In fact, if LTH also engages in panic selling, there is a possibility that downward pressure on the price will further increase. The lack of support from these long-term holders increases the risk of intensified selling in the market.
Solana faces increasing sales pressure
Solana’s overall macro momentum is showing signs of weakening. The foreign exchange net position change indicator highlights an increasing trend in foreign exchange inflows, which indicates an increase in selling activity.
Over the past four weeks, this indicator has consistently noted that Solana is under selling pressure from investors, further exacerbating the bearish sentiment surrounding the asset.
If more Solana holders sell their holdings, downward pressure on SOL could increase. This increase in decline could further worsen the bearish pattern forming on the chart, increasing the likelihood of price dropping below key support levels.
SOL price could go off the flag
As of this writing, Solana is trading at $83 and remains within the $77 to $87 range. The formation of a bearish flag pattern indicates that the price could fall significantly if it breaks below the $77 support level. Below this level, Solana could plummet by 38%, sending the price down to $51.
For this crash to occur, selling pressure will need to continue to rise and Solana will need to break through the $64 support level. If this happens, the price could fall to $57, $51, and eventually $45, validating the bearish pattern.
However, if investor sentiment changes and the focus shifts to supporting economic recovery, Solana’s price could break out of consolidation. If SOL can break above the $88 and $96 resistance levels, the bearish outlook will be invalidated and the price could rise towards $100 and hit a monthly high.
