Solana (SOL) risks a significant price correction in the coming weeks due to a classic bearish reversal setup.
35% SOL price correction ahead?
On the three-day chart, SOL’s price is depicting a rising wedge, confirmed by two ascending, converging trendlines and parallel falling trading volumes.
Rising wedges usually lead to a breakdown, resolving after the asset’s price breaks below the lower trendline. If the price follows a breakdown scenario, it may fall as far as the maximum distance between the upper and lower trendline of the wedge.
SOL is far from a breakdown but trades in a falling wedge range as shown in the chart below. The token eyes an immediate pullback from the upper trendline of the wedge with its interim downside target sitting at around $45 on the lower trendline.
If the price breaks below the lower trendline with rising trading volumes, there is a risk of a fall to $30. In other words, a 35% price drop by September.
Conversely, a bounce off the lower trendline would see the SOL eye an immediate rebound towards the tip of the wedge at around $53.50.
If SOL rises to the 50-3D exponential moving average (50-3D EMA; red wave) near $58, a critical breakout above the upper trendline will invalidate the bearish reversal setup.
$SOL Daily close above $45
25% size entered (bear market size)
Target $56-60 and stops below $42 pic.twitter.com/xo7zfDGMrZ
– Pentosh (taking cattle to slaughter) (@Pentosh1) August 13, 2022
Fighting is FUD
Solana’s rising wedge breakdown setup appears to be facing a flurry of negative incidents, including repeated network outages, centralization concerns, and widespread exploitation targeting Solana wallets.
Nevertheless, SOL rallied nearly 40% in August, mirroring other crypto assets that gained an average of 11% month-to-date.
A portion of Solana’s profits came even after its team quickly clarified that Web3 wallet provider Slope was solely responsible for the $8 million exploit of crypto wallets including Solana.
After investigation by developers, ecosystem teams, and security auditors, the affected addresses were at some point created, imported, or used in Slope mobile wallet applications. 1/2
— Solana Status (@SolanaStatus) August 3, 2022
Similarly, Solana released its first “Validator Health Report” on August 10 in response to allegations that its network was too centralized. It reports that Solana’s proof-of-history (PoH) blockchain has 1,900 block-producing nodes worldwide.
About 88% of those nodes are operated by independent entities, the report added.
Additionally, in May, Solana developers focused on implementing the initial stages of their Mainnet Beta v1.10 series, introducing QUIC and Quality of Service (QoS) packets through stack weighting and fee prioritization to protect the network against potential outages.
Related: Is Your SOL Safe? What we know about Solana Hack | Find out now in Market Report
“The network showed signs of stabilization post-v1.10 as lower transaction fees occurred and the daily transaction count reversed the trend between mid-May and late June,” said James Troutman, researcher at Messari. Their Solana Q2 report.
Solana’s transactions per second (TPS) has also improved, from ~700 during the network outage to an all-time high of over 3,000 since v1.10 began rolling out. Trautman added:
“If implementations of v1.10 and later versions continue to drive stability along with successful ecosystem growth strategies, fundamentals can move in a positive direction and so can network value.”
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