Solana’s [SOL] recovery thwarted – Will bears enjoy more benefits?

Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion.

• SOL’s market continued to weaken. 
• The Funding Rate fluctuated as development activity declined.

Solana’s [SOL] value has fallen significantly since 20 February, dropping from $27 to $20 before bulls attempted a recovery. However, the recovery hit a key roadblock that could offer bears more influence in the market. 

Read Solana’s [SOL] Price Prediction 2023-24

Descending line prevented a successful recovery

Source: SOL/USDT on TradingView

After the price rejection at $27.14, SOL’s momentum declined as bulls toiled below the descending line (orange, dashed). At the time of writing, the recovery faced rejection at the descending line, setting the stage for bears to re-enter the market. 

As a result, bears could sink SOL’s price toward $20.35. Short-sellers could seek shorting opportunities at $20.82 and $20.35. An extended drop, especially if BTC drops below $22k, could push SOL below the psychological level of $20. 

Alternatively, near-term bulls could look for gains at the 23.60% Fib level of $22.95 or the 50-period EMA (exponential moving average) of $22.15 if SOL closes above the descending trendline ($21.48). The bulls could push SOL toward the next resistances at the 38.2% Fib level ($22.95) or 50% Fib level ($23.75) if they clear the 50-period EMA. 

The RSI (Relative Strength Index) hovered below the 50-mark for the past few days, indicating bears’ leverage in the market. In addition, the OBV (On Balance Volume) declined significantly in the same period, thus limiting the buying pressure and potentially strong recovery. 

The Funding rate fluctuated, but sentiment improved

Source: Santiment

According to Santiment, SOL’s development activity declined gently over the past few days. It was worth noting that the network announced a mitigation plan following a network glitch. However, the declining development activity could undermine investors’ outlook on the native token.

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 Interestingly, the weighted sentiment improved significantly but remained negative. It means that investors softened their stance on the token, but the prevailing bearish market sentiment after the Silvergate saga hasn’t made it any easier on SOL.

This is reinforced by the fluctuating demand as shown by the Funding Rate. Any further drop in demand could give bears more influence in the market and potentially push SOL to retest $20.