Solana Faces 30% Drop Risk as Death Cross Looms

Solana (SOL) is currently facing significant challenges as it grapples with bearish market conditions. The recent occurrence of a "death cross" on its charts has raised concerns about potential price declines. This technical indicator, which happens when the 50-day simple moving average (SMA) drops below the 200-day SMA, signals a potential shift towards downward momentum. Historically, this event has triggered substantial sell-offs for SOL, with three previous occurrences since its inception.

Solana's price action is currently hovering near critical support levels between $125 and $110. Maintaining above this range is crucial for the bulls, as this support has traditionally led to rebounds in SOL’s price. Since March 2024, Solana has bounced back from this range six times, marking it as a pivotal point for potential bullish reversals. A significant drop below $110 could catalyze a downward price trajectory, potentially targeting around $80—a substantial correction of 30%.

Despite the bearish signals, there are indications of bullish divergence on both the one-day and four-hour charts, where the price and relative strength index (RSI) do not align. If SOL can avoid making another lower low, these divergences may provide support, allowing a possible recovery above $125. This scenario is critical to stave off further losses and could inspire a market shift, pushing SOL back towards stability.

Historical trends show that Solana’s performance following death crosses can vary significantly. For instance, the first death cross in 2022 led to a drastic 90% price drop, primarily driven by the FTX collapse, while other instances, such as the second death cross in September 2024, were followed by recoveries within a month. The current market conditions reminiscent of the 2022 situation suggest that traders and investors should proceed cautiously as they consider the potential for further declines.

The future of Solana rests heavily on its ability to maintain critical support levels while navigating through prevailing market challenges. If bulls can defend the $125 to $110 range, there is potential for a positive reversal; however, failure to hold this support could unleash significant downward pressure on SOL’s price trajectory. This precarious situation emphasizes the importance of ongoing monitoring and strategic positioning in the ever-evolving cryptocurrency landscape.