Solana’s (SOL) price is currently down by 10% on the weekly chart, with the altcoin nearly nullifying its gains from the previous week. The correction is taking place across the entire market, with the total crypto market cap down by 7.8% on Aug. 28.
Solana has struggled to undergo a fresh uptrend since the beginning of April, as the price action has consolidated sideways over the past 5 months. While Solana-based PayPal stablecoin (PYUSD) has crossed a market cap of $1 billion, onchain activity and demand on Solana have progressively dropped over the past few weeks.
Solana open interest drops b 12% in 24 hours
Solana’s open interest (OI) has declined by 12% over the past day. SOL’s 16% price drop in August has coincided with a weakening derivatives market, with OI dropping from a high of $2.83 billion to $2.08 billion.
Liquidations amassing above $15 million over 24 hours further aggravated bearish pressure, as over $13 million in long positions were wiped out.
SOL spot holders are selling
Another reason for SOL’s current bearish premise is negative spot net flows over the past month. Solana has suffered $526 million in spot selling volumes, which is the third largest among the top ten crypto assets.
Moreover, while spot netflow is negative for all assets, SOL has witnessed the largest selling pressure relative to market cap.
For example, Bitcoin’s spot negative netflow is almost thrice as high as Solana’s, but its market cap is also 17 times larger. Hence, spot investors are relatively selling more SOL than BTC.
Solana may drop another 12% in the coming week
Since the beginning of April, Solana has oscillated sideways for over 70% of the time period. This particular range between $162 and $127 has largely acted as the accumulation zone, and SOL has regularly tested the upper limit and lower limit over the past 5 months. On a couple of occasions, it breached above $162, only to drop back within range in ten days.
After the flash crash at the beginning August, the altcoin tested the upper limit of $162 twice, and the traders were hopeful that previous weeks’ retest would trigger a new bullish leg.
That did not pan out, and based on historical market behavior, SOL will potentially retest $127 in the next few days, which is the lower limit of the accumulation zone.
However, it is important to note that each correction down to $127 has taken place within a week of SOL breaking under $150 on previous lows.
If the SOL/USD pair is able to close the daily candle above $140 for next week, a drop down to $127 will likely be avoided. There is also support from the 200-day EMA, which means SOL has a legitimate chance of recovery.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.