Solana's Death Cross Signals 30% Correction Risk

Solana (SOL) experienced a significant technical event on March 12, as its price completed a “death cross” on the one-day chart. This occurred as the cryptocurrency consolidated near its long-term support level at $125. A death cross is a bearish indicator that happens when the 50-day simple moving average (SMA) crosses below the 200-day SMA, suggesting a potential sell-off.

This technical pattern could accelerate a sell-off in the near term, potentially driving the SOL price below $100 for the first time since February 2024. The implications of a death cross are significant, as it often signals a prolonged period of bearish momentum. Last month, a similar death cross occurred between the 50-day and 200-day exponential moving averages (EMAs), leading to a 17% price drop from $137 to $122. While both SMA and EMA death crosses carry similar implications, EMAs trigger the death cross faster due to their responsiveness to price changes. A double death cross from both SMAs and EMAs could increase the likelihood of a correction.

Historically, Solana’s price has witnessed a death cross three times since its inception, including the current instance. The first death cross in 2022 triggered a 90% collapse, exacerbated by the FTX fiasco. The second death cross in September 2024 reversed within a month, leading to a rally. The current market conditions and sentiment mirror the 2022 death cross, where a new all-time high preceded the downtrend leading to the death cross.

Solana’s revenue has dropped 93% since January, from $238 million to $32 million, indicating a lack of activity on its network following the end of the memecoin frenzy. This decline in revenue adds to the bearish sentiment surrounding the cryptocurrency. Based on its technicals, Solana remains in a precarious position. The cryptocurrency must hold support between $125 and $110 for a bullish reversal. Since March 2024, SOL prices have rebounded six times after testing this support range, closing above $125 on each weekly retest.

A weekly close below $125 could signal market weakness, increasing the likelihood of a drop below $100. The immediate price target after $110 is around $80, which represents a significant 30% correction. This downtrend target aligns with the weekly 0.5 Fibonacci retracement line. However, bulls may find hope in the bullish divergence between the price and the relative strength index (RSI) on the 1-day and 4-hour charts. If Solana manages to avoid another lower low, these divergences could push prices higher above $125, potentially establishing a bottom at $112 and avoiding a drop below $100.