Solana price remains in a deep bear market as the ongoing consolidation in the cryptocurrency continued. It was trading at $140, down by over 34% from its highest point this year, giving it a market cap of over $64 billion.
Competition is rising
Solana’s retreat is in line with the performance of the crypto industry and the ongoing sense of fear among investors and traders. Data by CoinMarketCap shows that the crypto fear and greed index dipped to the fear zone of 38. Most cryptocurrencies underperform the market when there is a sense of fear in the market.
Solana is also reacting to the ongoing competition among other blockchains. The most notable ones is Tron, the blockchain platform started by Justin Sun, which launched its meme coin generator last month.
While it is too early, there are signs that the network is gaining traction among users. Looking at the numbers, we see that there are hundreds of new meme coins in the SunPump ecosystem, with Sundog, Tron Bull, Invest Zone, and Muncat being the biggest ones.
These tokens have accumulated almost $600 million in assets in the past few weeks, with SunDog being the biggest one.
On the other hand, Solana’s Pump.fun also has hundreds of meme coins, with a combined market cap of over $552 million. Fwog, Michi, Mother Iggy, and Daddy Tate are some of the biggest ones in the ecosystem.
More data shows that Tron’s Sunpump has generated over $51 million in fees, a substantial amount for a network that is just a month old.
Solana is also facing more competition from other layer-1 and layer-2 networks like Coinbase’s Base Blockchain, Sui, and Arbitrum. Solana’s DEX transactions in the last seven days totalled over $4.8 billion while Base handled $3 billion. This is notable since Base was launched just a year ago.
Odds of Solana ETF drop
Solana price has also dropped as excitement about potential Solana ETFs fade. After the Securities and Exchange Commission (SEC) approved spot Ethereum ETFs, odds were that Solana would be next.
However, recent data show that financial services companies may not be interested in a Solana ETF. Data by SosoValue shows that Ethereum ETFs have net assets of over $6.6 billion and have had cumulative outflows of over $581 million, a sign that there is no demand among investors.
Therefore, there is a likelihood that the top institutional investors will not be interested in investing in a Solana ETF. That’s likely because investing in these funds means that they will not receive the staking yield that Solana investors receive.
Meanwhile, Solana’s staking yield has been in a downward trend in the past few months. Data by StakingRewards shows that the yield stood at over 7.17% in May and has now dropped to about 6.8%. This is still a good return considering that a $10,000 investment would generate over $600 if the status quo remained.
Solana has also dropped because of the ongoing liquidations by the FTX Estate. This week, FTX continued to unstake tokens worth millions of dollars. They also have over $954 million tokens staked, meaning that the unstaking will lead to more supply.
Solana price analysis
Solana chart by TradingView
Turning to the daily chart, we see that the Solana price peaked at $210 in March as the crypto bull run continued, and as the chain became popular for meme coin traders.
Since then, it has formed a series of lower highs and lower lows, meaning that bears have been in control. It also formed a triple top chart pattern, which is a popular bearish sign.
Most recently, Solana has found a strong support level at $120, where it failed to move below on April 12 and 30, June 23 and July 5. It made a small false breakout below that support on August 5 and failed to move below it in August. This price was slightly above the 50% Fibonacci Retracement level.
The biggest technical risk that Solana faces is that it is about to form a death cross as the gap between the 50-day and 200-day Exponential Moving Averages (EMA) narrowed. A death cross is one of the most dangerous patterns in the market.
For example, Ethereum price has dropped by over 30% after forming the pattern a few weeks ago. Solana also rallied by over 800% after it formed a golden cross pattern in October 2023.
Therefore, Solana’s outlook is relatively neutral at this stage. If the death cross pattern forms and it then crosses the key support at $120, it will lead to the next plunge to the 61.8% retracement point at $88.
On the other hand, a volume-supported movement above the 50-day moving average at $145, will increase the chances of the coin rising to the 23.6% Fibonacci Retracement point at $165.
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