The ninth-largest crypto to date, Solana, is seemingly headed for disaster, as the accumulation in the past couple of months may soon end.
It turns out that technical analysts saw an alarming signal, which is commonly considered to be a recipe for a price disaster. The “Head and shoulders” price pattern forms when the price forms three consecutive peaks atop a common resistance level (called the neckline). What is distinct in the head and shoulders formation and sets it apart from other trend lines is the middle peak (head), which comes to be higher than the other two shoulders, which are of almost equal height.
What happens next
Solana is now forming a clear head and shoulders pattern, with technical analysts considering the imminent fall of the crypto below or at the breakout point, formed at around $26 per token.
Interestingly, last week SOL managed to close its right shoulder, and now the ninth-largest crypto is moving down in terms of price, which falls precisely in the predictions. However, in order for the head and shoulders pattern to really take place, Solana’s price must enter a free fall, which could push the price per SOL token toward the neckline at $27 during the second half of 2022. The analysis gives out an even scarier prediction for Solana, as the downtrend may go through the $27 neckline, which would most probably induce an extended correction toward $2.80.
This means that by the end of 2022 or early 2023, Solana may face a 95% wipeout, according to Twitter technical analyst PROFIT BLUE.
Are cryptos becoming more tied to traditional markets?
Solana’s future price performance is increasingly correlating with the price action of risk-on markets, which are mainly driven by the Federal Reserve's hawkish response to inflationary pressures.
It turns out that Solana, as well as the majority of the crypto sector, closed last week on a 10% profit, which is correlating with the S&P 500 index, which acts accordingly to a softer-than-anticipated U.S. consumer price index (CPI) measure, giving investors a room to breathe with the belief that the Fed would slow the pace of its interest rate hikes.
The correlation, however, may turn into a bearish trap, as the ongoing price rallies in the risky corners of the market may be nothing more than bear market bounces, which further sets the ground for another wave of fear, uncertainty, and doubt (FUD).
Furthermore, the recurring network outages and rumored centralization are not helping much, with Solana’s backers introducing a series of network updates to mitigate the issues.
However, market analysts also noted that such 95% market wipeouts are “wild”, while IncomeSharks even compared such a drop to a rug pull project like Terra (LUNA), which induced a short crypto winter and shifted the layers in the crypto ecosystem. Solana’s fall could be stopped at around $30, as this point is where the multi-year trend line sits, which is commonly considered a bullish factor.