Over the past two months, Solana’s price has faced mounting pressure due to increasing worries about its ecosystem.
The price of Solana (SOL) has fallen from its year-to-date peak of $295.52 to a low of $112 this week, erasing $71 billion in market capitalization as its total market cap decreased from $139 billion to $68 billion.
This decline is attributed to the prevailing crypto market downturn, which has driven the overall industry market cap down to $2.8 trillion.
Additionally, concerns regarding Solana’s ecosystem have intensified as it has become closely associated with meme coins. The market capitalization of all meme coins connected to Solana tracked by CoinGecko has dropped from over $25 billion earlier this year to $7.7 billion. A significant worry is that many of these meme coins have resulted in rug-pull scams.
Another element impacting Solana’s price is a substantial token unlock that occurred earlier this month, related to recent distributions from FTX. Such a token unlock introduces additional tokens into circulation, which can lead to dilution and exert downward pressure on the price.
Moreover, Solana has witnessed a decline in its market share within the DEX sector, with Ethereum (ETH) gaining ground. Recent data reveals that the total trading volume generated by DEX protocols on the Solana network reached $76.95 billion in the last 30 days, compared to Ethereum’s $84 billion.
Technical Analysis of Solana’s Price
On a more optimistic note, there are indications that Solana might make a significant recovery once the current market turmoil subsides.
The weekly chart suggests that the accumulation and distribution indicator has been on the rise in recent months, signaling that investors have been buying SOL during this downturn.
Most notably, Solana has been developing a cup-and-handle pattern, a bullish configuration marked by a rounded bottom, a horizontal resistance line, and a pullback.
In Solana’s case, the horizontal line connects the peak levels from 2021 and 2024. The ongoing retreat represents the handle section’s formation. If Solana manages to maintain a price above $100, there is a strong possibility of a rally.
The cup has a depth of approximately 95%. Measuring that same distance from the top of the cup indicates a potential rise to $505, suggesting a 270% increase from current values.
However, it’s important to note that cup-and-handle patterns often take time to fully form, meaning the anticipated 270% rise could span months or even years. For instance, it took three years for the cup section to develop.