Solana (SOL) has experienced significant price declines in recent weeks, closing August with its second-worst weekly return of 2024, down 19.14%. This decline follows a previous drop of 25.19% in July, highlighting ongoing volatility. For the first time since September 2023, SOL has closed multiple daily candles below the 200-day exponential moving average (EMA), a key support level.
Market Dynamics and Bearish Indicators
In August, Solana faced a negative spot net flow of $500 million, shifting market focus to derivatives. Despite a 12% drop in open interest (OI) over 24 hours after prices fell below $150, OI has since increased by 20%, indicating heightened short-selling activity among futures traders.
SOL price, aggregated open interest, and funding rate. Source: Velodata
The funding rate for Solana has turned negative, remaining at -0.001 for the past week, its lowest point in 2024. This negative funding rate underscores a prevailing bearish sentiment in the market.
Declining On-Chain Activity and DEX Volume
Solana’s on-chain activity has also diminished, with its weekly decentralized exchange (DEX) volume dropping to a six-month low of $7.7 billion. This contrasts sharply with Solana’s earlier performance when its daily DEX volume consistently exceeded $3 billion and outpaced Ethereum’s trading volume by 50% in March.
Solana DEX volume chart. Source: Dune Analytics
Technical Analysis and Price Predictions
According to analyst Bluntz_Capital, the SOL/BTC chart looks “horrid,” suggesting further downside potential. Solana’s price is now facing a critical test at the $127 support level. The altcoin has briefly dropped below $120 six times since April 2024 but managed to close above $127 each time. With the recent loss of support from the 200-day EMA, the risk of a decline to $110 or even $100 has increased.
SOL/BTC chart from bluntz_capital. Source: X.com
If Solana loses the $127 support, the next major target could be $110, which might trigger a liquidity sweep. A prolonged bearish trend could see SOL retest the $98 to $104 demand zone, potentially reaching a new low below $100. However, if Bitcoin drives a bullish recovery in Q4, Solana may avoid falling below the $100 mark in September.
