The cryptocurrency market is experiencing turbulence, and Solana (SOL) is feeling the pressure with a significant price drop of over 6.25% in just 24 hours, bringing it to approximately $194.50 on February 12.
Several factors contribute to this decline. The recent sell-off in the crypto market was triggered by the US Federal Reserve Chairman Jerome Powell’s hawkish outlook on interest rates, which has had a ripple effect across various cryptocurrencies. Powell’s statements indicated a less restrictive monetary policy in the near term and suggested no urgent need to adjust rates, contributing to market concerns.
The market’s response to Powell’s remarks has been volatile, with both short and long-term Treasury bond yields maintaining elevated levels. This situation makes traditionally safer investments like Treasury bonds more attractive compared to riskier assets such as Solana, causing a pullback.
In addition to macroeconomic factors, Solana is experiencing a notable decline in on-chain activity. Recent data indicates that daily transactions on the Solana blockchain plummeted from an all-time high of 71,738 on January 23 to just 23,835 on February 12. This lack of network activity diminishes user engagement and, consequently, the demand for SOL.
Besides the drop in transactions, the growing interest in memecoins, which had contributed to Solana’s recent price surge, is also dwindling. The total market cap for Solana-based memecoins now stands at approximately $11.15 billion, but most have faced substantial declines in recent days, showcasing a reduced appetite from investors.
An emerging concern is the technical analysis indicating that Solana might be developing a head-and-shoulders (H&S) pattern. As of February 12, SOL appears to be forming the right shoulder of this pattern, aiming toward a neckline support around $180.50. A breakdown below this level could potentially lead to a further price reduction towards the H&S target of $109.21, marking a decline of over 40% from current levels.
However, if Solana can maintain levels above the neckline, there may be a possibility of recovery toward its local high of $215. Understanding these dynamics is essential for anyone with interests in the Solana ecosystem, particularly given the volatility and uncertainties present.
