Solana (SOL) is approaching a pivotal breakout moment as it nears the top of its dominant descending triangle pattern.

Setting SOL to reduce the price by 40%

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Notably, the price of SOL is consolidating within a range defined by falling trendline resistance and horizontal trendline support, which looks like a descending triangle – a trend continuation pattern.

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Therefore, since the SOL is trending down, about 85% from its November 2021 peak of $267, it is more likely to break below the triangle range.

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As a rule of technical analysis, a breakout movement, followed by the formation of a descending triangle, can continue until the price falls to the maximum height of the triangle. So the bearish price target for SOL in June is $22.50, about 40% below today’s price.

SOL/USD daily chart with descending triangle breakout setup. Source: Trading View

But not all descending triangles lead to breakdowns, offers Research conducted by Samurai Trading Academy. Notably, the probability of a descending triangle setup hitting its profit target is 7 out of 10 based on the history of the pattern.

Thus, the SOL has approximately a 30% chance of avoiding a breakdown and recovery.

Solana Recovery Scenario

Descending triangles, which form during a downtrend but still result in a price reversal, usually mark the bottom of an asset’s bearish cycle.

Assume that SOL holds above the support of the horizontal triangle trend line. The SOL/USD pair could then break through the resistance of the falling trend line and rise to its maximum high, placing its upside target near $65, about 72% higher than today’s price.

SOL/USD daily chart with a descending triangle reversal setup. Source: Trading View

The descending triangle bullish profit target also aligns with the SOL (50-day EMA; red wave) 50-day exponential moving average near $59.

Meanwhile, the daily SOL Relative Strength Index (RSI), which has been deviating from the 30 oversold threshold since May 12, also raises the token’s upside prospects.

Solana TVL down 75% from peak

Meanwhile, the fundamentals of Solana are ambiguous.

As a blockchain network, it has performed poorly in recent months due to successive failures. While the total value locked (TVL) in Solana’s smart contracts has fallen to $3.69 billion, down 75% from the all-time high of $14.83 billion in December 2021, data from Defi Llama reveals. shows.

The history of Solana’s performances on TVL. Source: Defi Lama

On the other hand, Solana posted a steady increase in network usage, developer activity, network infrastructure, and overall ecosystem in the first quarter of 2022. study written by James Trautman, a researcher at the American cryptanalytic firm Messari.

Excerpts:

“First quarter results were impacted by several factors, including the continued growth of new NFTs and NFT markets, TVL diversification, UX improvements, and new applications across multiple sectors outside of DeFi.

Is Solana a “buy” with SOL at a 10-month low and 85% below its peak?

On June 8, Solana’s venture capital arm launched a $100 million investment and grant fund to support its blockchain-based products in South Korea, a country whose crypto sector was hit by the recent collapse of Terra, a $40 billion “algorithmic stablecoin” project.

This decision is expected to attract developers who want to migrate their projects from Terra to Solana, which could lead to increased demand for SOL.

The views and opinions expressed here are solely those of the author and do not necessarily reflect those of Cryptooshala.com. Every investment and trading step involves risk, you should do your own research when making a decision.