The Solana price is weighed down by overhead supply as the longs continue to de-risk to unwind cryptocurrency positions.
Solana (SOL) dropped over 10% on Monday as macro headwinds forced the cryptocurrency complex sharply lower. The combination of a hawkish fed and contagion risk tied to the collapse of Chinese property developer Evergrande has triggered a market-wide risk-off. Despite rallying over the weekend, cryptos came under pressure from the get-go on Monday morning. The selling accelerated after Bitcoin lost the $50k support level, sliding as low as $45,670, triggering heavy losses in altcoins. As a result, the SOL token crashed to a two month low of $147.95, hitting our initial price target. However, considering the overall bearish sentiment, an extension to my ‘worst-case scenario’ is possible.
The daily chart shows the Solana price is extending further below the support (now resistance) of the 100-Day Moving Average at $185.80. In my opinion, SOL should continue to trade with a bearish bias if the price stays below the long-term indicator. In that event, a drop into the $116-$125 range looks likely.
However, the Relative Strength Index reading of 32 is approaching oversold. On that basis, should the sell-off continue, it may be short-lived. Subsequently, buyers should emerge towards the 200-DMA at $116.12.
Solana will avert a sell-off it recovers the 100-DMA. Therefore a daily close above $85.83 invalidates the bearish thesis.
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