Solana’s (SOL) price dropped on June 3, bringing its net paper losses down to 85% seven months after topping out above $260.
SOL price fell by more than 6.5% intraday to $35.68, after failing to rebound with conviction from 10-month lows.
Now sitting on a historically significant support level, the SOL/USD pair could see an upside retracement in June, eyeing the $40-$45 area next, up around 25% from today’s price.
60% SOL price decline ahead?
However, a rebound scenario is far from guaranteed and Solana faces headwinds from trading in lockstep with Bitcoin (BTC), the top cryptocurrency (by market cap) that typically influences trends across the top altcoins.
Notably, the weekly correlation coefficient between BTC and SOL was 0.92 as of June 4.
What’s more, Solana is likely to see even bigger losses than BTC if Bitcoin falls deeper below its current psychological support level of $30,000.
Meanwhile, the Federal Reserve looks determined to raise benchmark interest rates and reduce its balance sheet. As a result of this hawkish policy, riskier assets like Bitcoin have room to go lower, hurting Solana’s bullish prospects.
Breaking below SOL’s current support level—around $35—raises the chances for a decline toward the $18-25 range, which acted as a strong support area in March-July 2021, and preceded a 1,200% price rally, as shown below.
This bearish scenario would put SOL almost 60% below today’s price.
Solana network outages
The bearish outlook for SOL also comes as the Solana blockchain faces repeated outages, thus leaving its network practically unusable for its key “dapps,” including lending protocol Solend and decentralized exchange Serum, for hours.
Solana’s latest software glitch appeared on June 1 that shut down the network for 4.5 hours. The blockchain’s biggest outage happened in January and was down for almost 18 hours.
The outages risk spooking investors to the benefit of Solana’s competition and have already coincided with several traders rotating their capital elsewhere.
Miles Deutscher, an independent market analyst, believes crypto investors have become cautious after witnessing the recent Terra fiasco. Nonetheless, the analyst asserts that Solana’s outages would decrease over time as the network matures.
“But if they fail to stifle such events, then other L1s [layer-1 blockchains] will continue to eat away at its market share,” he noted.
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