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Solana’s (SOL) price experienced a sharp 8.03% decline in the last 24 hours, marking the first time it has fallen below the $200 level since early November. This downturn aligns with the broader market slump, which triggered widespread liquidations.
Despite the significant slip, it appears that Solana traders expected the altcoin to bounce off the lows quickly. Can it?
Solana Still Undervalued, Bulls Hopeful
Solana’s price action aligns with BeInCrypto’s December 15 analysis, which suggested that the altcoin could struggle to remain above $200. In the piece, we cited how bears had outpaced bullish dominance as the price broke below the 20-day Exponential Moving Average (EMA).
With Solana under $200, one would expect that traders would exercise caution when betting on a price increase. But that is not the case. According to Coinglass, the Solana Long/Short ratio is rising. The Long/Short ratio shows whether traders anticipate a price increase or a decline.
When the ratio drops, it means the average expectation is bearish. But as it stands, the ratio is increasing and on the verge of surpassing a reading of 1. This rise indicates that Solana traders are confident that the recent decline will only last for a short period.
This sentiment could also be linked to the state of some indicators on-chain. One such metric is the Market Value to Realized Value (MVRV) ratio. The MVRV ratio measures profitability in the market and shows whether a cryptocurrency is undervalued or overvalued relative to its fair value.
Typically, a high MVRV ratio indicates notable unrealized profits in the market. In this case, holders will be willing to sell as the crypto nears the local or market top. However, a declining ratio indicates dropping gains and serves as an opportunity zone for accumulation.
According to Glassnode’s data, Solana’s MVRV ratio currently stands at 1.45, approaching the undervalued zone. Historically, SOL price tends to reach a market top when its MVRV ratio hits around 2.83.
This drop in the MVRV ratio indicates that SOL might be nearing a potential accumulation phase. Still, the potential recovery depends on the condition of the broader market.
SOL Price Prediction: Indicators Opt Against Quick Bounce
Solana has previously formed a bull flag that hinted at a potential run to $300. However, today’s evaluation of the daily chart shows that the outlook has been invalidated because SOL price slipped below the support line at $209.58.
Beyond that, altcoin’s trading volume has continued to decrease, with the majority in favor of sellers. If this trend persists, Solana’s price could drop to $153.97, putting long-positioned traders at a loss and reducing the likelihood of a quick rebound.
Conversely, if bulls prevent the token from dropping below $170.75, the extended correction may be avoided. Solana could then rebound from under $200, potentially rising to $264.66.