Layer-1 coin Solana has surged nearly 10% over the past week, driven by renewed momentum in the broader crypto market. Bitcoin’s recent price increase has uplifted the entire market, pulling SOL and other altcoins upward.
However, a closer inspection of SOL’s performance reveals that this rally may lack substantial support and could see a reversal soon.
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Solana’s Price Gains at Risk: Data Hints at Trouble
SOL’s rally is at risk of decline as its Chaikin Money Flow (CMF) exhibits a downward trend, forming a bearish divergence. Currently, the momentum indicator sits below the zero line at -0.06 and continues to decline.
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The CMF indicator assesses the flow of money into and out of an asset. Negative values during a price increase indicate a bearish divergence, suggesting weakening liquidity.
This scenario indicates that even with buyers pushing the price higher, capital inflow is decreasing, which may prompt a reversal in the near future.
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Additionally, the number of new addresses interacting with the Solana network daily has decreased, indicating reduced activity and declining demand. According to Glassnode, the daily tally of new wallet addresses on Solana has dropped by 15% since September 18.
A decline in daily active addresses signals a slowdown in network engagement, which can be concerning for an asset’s fundamental demand.
This may lead to lower buying pressure for SOL, decreasing the chances of sustained upward price movement.
Weak Demand Clouds Solana Rally
SOL’s rally over the past week has positioned its price within an ascending parallel channel, typically indicative of a bullish trend. However, with demand weakening, the token’s price might dip below this pattern and target $205.02.
Alternatively, if the altcoin sustains its rally, its price could escalate to $253.66.
