Solana Faces Key Support Test at $110, ETF Decision Looms

An expert has identified a potential path for Solana (SOL) to reach $4,000, highlighting a technical setup that could drive the decentralized finance (DeFi) asset to this significant milestone. The expert, Ali Martinez, pointed out the formation of a cup and handle pattern, which is often seen as a strong indicator of a bullish trend. This pattern, which has been developing since November 2021, suggests that Solana could experience a major upward movement in price.

Martinez noted that Solana has experienced a U-shaped decline followed by a level-off phase, which is now evolving into the pattern’s “handle.” This technical formation is often seen as a precursor to a major upward movement in price. If Solana can decisively break above the $200 mark, the odds of a continued bullish rally increase significantly. A $4,000 valuation would likely elevate Solana to the highest-ranked digital asset with a market cap exceeding $2 trillion, provided Bitcoin (BTC) stagnates during this period.

Another analysis by Ted Pillows also stressed the significance of Solana holding the $110 level. Dropping below this mark could usher in a sustained correction for SOL. Pillows stated that Solana stands at a key juncture, considering its retest of a multi-year support zone and a long-term uptrend line. Historically, these levels have provided strong buying opportunities. He highlighted the importance of the $110 to $120 zone, noting that failure to hold support could open the door for a deeper correction of 30% to 40%. However, a successful bounce could signal a reversal, with a potential upside if bullish momentum returns.

While technical indicators are crucial to Solana’s next price trajectory, other fundamentals are also coming into play. The spot exchange-traded fund (ETF) is a key factor, with several entities having applied for the product with the Securities and Exchange Commission (SEC). On March 11, the SEC postponed its decision on multiple altcoin ETFs, including those for XRP, Solana, Litecoin (LTC), and Dogecoin (DOGE). The agency extended its review period, pushing decisions on Grayscale’s XRP ETF and Cboe BZX’s Solana ETF to May. Although part of Solana’s momentum last year was driven by meme coin activity on its network, an ETF approval could help broaden SOL’s appeal and attract long-term investors.

On the other hand, a proposal to slash Solana’s inflation rate by 80% (SIMD-228) has failed to pass after falling short of the required 66.67% approval. Despite securing 61.39% “Yes” votes, opposition from smaller validators tipped the balance, keeping SOL issuance unchanged. The decision could lead to short-term selling pressure, as lower inflation would have reduced token supply, potentially driving up SOL’s price. However, higher rewards may sustain validator participation and network security, a long-term positive.

As of the latest update, Solana was trading at $133.10, well below its 50-day ($183.93) and 200-day ($186.79) moving averages (MA), signaling a strong downtrend. The asset’s market sentiment remains bearish, with the Fear & Greed Index at 27 (Fear). However, the 14-day relative strength index (RSI) stands at 35.38. SOL must reclaim $150 and break above key resistance levels to reverse the bearish trend. Until then, downside risks remain in play.