Solana (SOL), one of the top-performing cryptocurrencies in the market, has recently experienced a 9% pullback after failing to reclaim the crucial $160 resistance level.
TLDR
In the month of May, Solana’s price action has been characterized by a remarkable surge, fueled by speculative traders pouring over $260 million in fresh capital inflows.
The cryptocurrency opened the month at around $118.74 and rapidly surged 34% by May 6, briefly touching the $159 mark.
While the subsequent rejection at the $160 resistance led to a mild correction, Solana’s bullish investors have not thrown in the towel.
A key indicator of this unwavering confidence is the recent staking activity on the Solana network. According to data from StakingRewards.com, Solana investors have opted to stake an additional 3.3 million SOL, worth approximately $490 million at current prices, during the ongoing pullback.
This move effectively removes these coins from the short-term market supply, potentially easing sell-pressure and allowing investors to earn passive income while they await a parabolic price breakout.
The staking trend is particularly significant when considered alongside Solana’s open interest (OI) data. Over the past 30 days, Solana’s OI has decreased by 40%, down to $1.78 billion on May 9.
While a steep decline in OI typically signals uncertainty among traders, Solana’s recent history of quick recoveries from price dips suggests that short positions totaling $125 million could be at risk if the cryptocurrency were to rebound to its May 7 price of $157.
Technical indicators also paint a bullish picture for Solana. The Bollinger Band indicator suggests that Solana’s price is more likely to break out towards $200 than to lose the $120 support level.
As long as SOL can maintain its position above the 20-day SMA price mark at $144, bulls could regroup for an attempt at the $200 milestone in the coming weeks.
However, Solana’s recent price drop may be partially attributed to the announcement by the now-defunct cryptocurrency exchange FTX, which stated that it has adequate funds to repay victims of the exchange’s collapse once it sells off its assets, a significant portion of which are in Solana.
This news, combined with a general decline in overall cryptocurrency market sentiment, as indicated by the Fear and Greed Index, may have contributed to the short-term pressure on Solana’s price.
Despite these challenges, Solana remains a strong contender in the ongoing competition with Ethereum. Recent findings suggest that the Solana network could be on track to overtake Ethereum in transaction fees, a development that could potentially trigger a price spike.
Looking ahead, technical analysis indicates that Solana is entering a new bull cycle. The MACD and signal lines are turning positive, giving a bullish crossover, while the daily RSI line shows a bullish divergence playing out as the uptrend gains momentum.
If Solana’s price can cross the 78.60% Fibonacci level, the altcoin could reach $258 in May. On the other hand, a reversal from the $165 supply zone or the 61.80% Fibonacci level could lead to a retest of the $150 or $135 support levels.
With increased trading volumes and a healthy recovery in the last 7 days, Solana appears poised to continue its upward trajectory, potentially surpassing the $200 mark and beyond in the coming months.
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Author: Oliver Dale
