Solana (SOL) May Drop 15% Despite Its Bullish Momentum: Here's Why

Solana (SOL), currently ranked the fifth-largest cryptocurrency, is on an upward trajectory, recovering from a sharp sell-off registered earlier in the week.

Text: As cryptocurrency markets continue to experience volatility, Solana (CRYPTO: SOL) has seen a recent recovery from earlier sell-offs in the week. However, technical indicators and on-chain data suggest that SOL may be poised for further price declines. Here are three factors that could lead to a 15% drop in SOL price:

1. Decreasing Address Activity: Despite being in positive territory for 2024, address activity on the Solana blockchain has shown a decline in September, both for new and active addresses. This decrease in address activity suggests a diminishing demand from investors in the market.

2. Bearish Technical Indicators: Across several time frames, technical indicators on Solana price charts hint at another double-digit decrease in SOL price. As of press time, SOL price trades at $142.15, up by 4.5% in 24 hours. However, on the weekly time frame, SOL is down by 9.6%. For instance, the Moving Average Convergence Divergence (MACD) indicator on the daily and 4-hour time frames shows an underlying negative momentum in SOL’s price trend.

Solana has traded within a tight range on the daily chart since August, with lows of $120 and highs of $163. However, on August 5, Solana price dropped to a low of $110. Currently, SOL trades close to $140, which is in the mid-range of the August price variation. If SOL is set to correct further, it could drop to the lower range of $120, indicating a decrease of around 15%.

Moreover, if SOL fails to hold at the August 5 lows of $110, it could open up further price correction. On the upside, SOL could move toward the psychologically important $160 level if it sees a daily candlestick close above Monday’s open at $158.

3. Declining Open Interest: Another factor that may cause SOL to drop by 15% of its value is Open Interest (OI). This metric showcases the total number of active positions in a specific contract, and traders use it to understand how money flows into and out of the market.

According to data from Coinglass, Solana’s OI decreased by about 20% between September 30 and October 4. This suggests that contracts are being closed, indicating that money is flowing out of the Solana market.

Solana Ecosystem Updates: Among the key updates in the Solana ecosystem are the expectations surrounding the potential launch of an Exchange-Traded Fund (ETF) product. If approved, institutional investors will be able to use SOL ETF products to gain exposure to the digital asset.

According to Bloomberg ETF analyst Eric Balchunas, the approval of a SOL ETF depends on the results of the 2024 US Presidential Elections. In a previous CNF post, the analyst stated that an ETF could be approved in 2025 if Donald Trump wins.

Another major update in the Solana ecosystem is an upcoming token unlock set for this month. As CNF reported earlier, Solana is set to unlock 524.03 million tokens, valued at $81.56 million, in an event that could stoke selloff fears.

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