Solana’s quote (SOL) fell on June 3, bringing its paper net loss down to 85% seven months after peaking above $260.
SOL price fell more than 6.5% intraday to $35.68 after failing to bounce with conviction from 10-month lows.
The SOL/USD pair, now at a historically important support level, could see a retracement to the upside in June, with an eye on the $40-$45 zone, 25% higher than the price current.
Is a 60% SOL Price Drop Coming?
Nevertheless, a recovery scenario is far from guaranteed and Solana faces obstacles in trading in unison with Bitcoin (BTC), the leading cryptocurrency (by market cap) that typically influences the trends of major altcoins.
Notably, the weekly correlation coefficient between BTC and SOL was 0.92 as of June 4.
In addition, Solana is likely to experience even bigger losses than BTC if Bitcoin falls further below its current psychological support of USD 30,000.
Meanwhile, the Federal Reserve seems determined to raise benchmark interest rates and reduce your balance. As a result of this aggressive policy, riskier assets like Bitcoin have space to go downwhich hurts the bullish outlook for Solana.
Breaking below the current SOL support level around $35 increases the chances of a drop into the $18-25 range, which acted as a strong support area in March-July 2021 and preceded a rally of 1,200% prices, as shown below.
This bearish scenario would put SOL almost 60% below the current price.
Solana Network Outages
The bearish outlook for SOL also comes as Solana’s blockchain faces repeated outages, rendering its network virtually unusable for its key dapps, including the lending protocol. Solend and the decentralized exchange Serumduring hours.
Solana’s latest software bug appeared on June 1 and took the network out of service for 4.5 hours. The biggest blockchain disruption is produced in january and lasted almost 18 hours.
Validator operators successfully completed a cluster restart of Mainnet Beta at 9:00 PM UTC, following a roughly 4 and a half hour outage after the network failed to reach consensus. Network operators an dapps will continue to restore client services over the next several hours.
— Solana Status (@SolanaStatus) June 1, 2022
Validator operators have successfully completed a restart of the Mainnet Beta cluster at 21:00 UTC, following an outage of approximately 4.5 hours after the network failed to reach consensus. Network operators and dapps will continue to restore services to customers for the next several hours.
The cuts risk scaring off investors to the benefit of Solana’s competition and have already coincided with a number of traders rotating their capital elsewhere.
Just sold all of my $SOL for $ADA. Solana is a great project but personally I cant in good faith continue to invest in a layer 1 that shuts down on a frequent basis (partial and major outages about 11 times).
— $Smac07_NFT$ (@Shawn_Deezy07) May 31, 2022
I just sold all my $SOL for $ADA. Solana is a great project, but personally I can’t continue to invest in good faith in a layer 1 that goes out frequently (partial and major blackouts about 11 times).
Miles Deutscher, an independent market analyst, cree that crypto investors have become cautious after witnessing the recent Terra fiasco. Nevertheless, the analyst says Solana’s outages would decrease over time as the network matures.
“But if they fail to quell such events, then other L1 [blockchains de capa 1] will continue to eat up their market share,” he said.
8/ However, the reasons I like Solana still stand:
• Scales using a single global state (liquidity isn’t fragmented).
• Low cost and fast (despite handling the most transactions of any chain).
• 3rd most developed on chain (Electric Capital)
• Large list of VC backers— Miles Deutscher (@milesdeutscher) June 2, 2022
8/ However, the reasons why I like Solana still stand:
• Scale using a single global state (liquidity is not fragmented).
• Low cost and fast (despite handling the largest number of transactions of any chain).
• 3rd most developed on-chain (Electric Capital)
• Large list of venture capital sponsors
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.
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