Solana's native token SOL saw a mild 0.23% price drop over the past 24 hours, falling from $21.82 down to $21.77 as of August 20, 2023. Tracking SOL's latest price movements shows the asset remains deeply depressed from its all-time highs, but could be nearing extremely oversold levels.
In the past week, SOL prices have edged 0.92% higher. However, zooming out paints a picture of protracted decline. Over the past 30 days, SOL has plunged 12.31%. The selloff extends to a 17.88% 90-day drop. And year-to-date, SOL prices have bled 17.15% lower.
Yet there are some silver linings amidst Solana's bearish price action. The network still boasts a strong market capitalization of $8.85 billion, ranking it #9 overall. 24 hour trading volumes reached a robust $217.79 million. And Solana's circulating supply stands at a lower 405,539,753 SOL tokens, giving it scarcity value.
So what's chiefly driving SOL's extended slump? And could the selloff be approaching exhaustion? An analysis of key factors impacting Solana can provide insights into its outlook.
Broader Macro Environment Remains Challenging
Like the rest of the cryptocurrency complex, Solana is struggling amidst a hostile macro backdrop. Red hot inflation combined with aggressive Fed interest rate hikes have sapped demand for riskier crypto assets.
With US inflation still running above 8%, the Fed has rapidly tightened policy, taking rates up to 2.25%-2.50% already. More hikes are slated through 2023 as the Fed tries cooling inflation.
Higher rates diminish appeal for volatile, speculative assets like SOL versus safe haven fixed income. Until inflation is reined in, the macro climate could continue buffeting cryptocurrencies.
Solana Correlated to Overall Crypto Market Weakness
Cryptocurrency prices have become highly correlated across the board, moving in sync with Bitcoin and Ethereum. As the overall crypto market has trended lower, SOL's price action has followed along.
Bitcoin has plunged 55% from its peak. Ethereum is down 59% off its highs. And SOL has matched those percentage losses, trading 69% below its all-time high.
With crypto prices moving in tandem, it may be hard for SOL to decouple from broader industry weakness. A recovery in Bitcoin and Ethereum prices could be needed to also lift SOL.
Investor Risk Aversion Compounds Crypto Sell-Off
Investor psychology has become much more risk averse in 2022-2023 amid heightened volatility. As a higher risk asset class, crypto has suffered greatly versus low risk stocks and bonds.
Surging volatility has manifested across markets, with the VIX spiking 68% year-to-date. Bitcoin's volatility has also expanded, reducing crypto's appeal for portfolio diversification.
Until risk appetite improves, the risk-off environment could persist, placing sustained pressure on Solana. But any moderation in volatility and inflation could prompt a rotation back into risk assets like SOL.
Confidence Sapped By Solana Network Disruptions
Network performance issues on Solana have also impacted investor confidence and selling pressure on SOL. Transactions froze for hours in June 2022 and again in January 2023 due to bugs.
While Solana has addressed the glitches, the repeated outages have raised concerns over the network's reliability during times of peak usage.
Restoring confidence in Solana's technical architecture could be key for SOL to bounce back. Continued enhancement of the network's security and scalability could aid price recovery.
SOL Use Cases Offer Long Term Potential
Despite SOL's ugly price action, the cryptocurrency still maintains tangible utility powering a vibrant ecosystem. As Solana's native token, SOL facilitates and secures transactions on the expansive Solana network.
SOL also provides governance abilities for validators and developers. And SOL offers staking rewards and DeFi functionality.
SOL has been severely oversold based on its use case strengths. In the eventual crypto recovery, SOL's real world utility could enable an outsized rebound.
SOL Price Prediction
While macro headwinds persist limiting near term upside, SOL appears deeply oversold following its long bear market. A meaningful improvement in risk appetite could spark a trend reversal.
Long term, SOL's staking incentives and pivotal role in Solana could drive tremendous upside during the next bull market. A measured long term target could be a recovery back to the $150 zone, representing potential gains of over 590% from current depressed levels.
Is Solana's Severe Bear Market Nearing Capitulation?
Solana's prolonged bear market throughout 2022-2023 has been painful, with SOL plunging 70% from its peak. Such extreme bearishness raises the possibility that capitulation could be close.
There are arguments for both sides on whether SOL may be bottoming. Ongoing macro pressures from inflation and rising rates could force more near term downside.
But capitulation often marks the end of bear cycles. And SOL appears extremely oversold based on its adoption and staking value. Once macro headwinds fade, SOL could stage a massive trend reversal.
With Solana's limited token supply, upside price spikes could be exaggerated. While more pain is possible in the interim, risk-reward is looking favorable for long term SOL investors.
Will Solana Overcome Network Reliability Concerns?
Solana's blockchain has experienced periodic outages from surges in transaction volumes or bugs. The reliability issues have shaken confidence in the network.
By enhancing Solana's architecture and scaling capabilities, the developers could restore trust. But until meaningful improvements materialize, doubts may linger.
On the plus side, Solana's team has addressed past incidents relatively quickly. And the glitches stemmed from Solana's popularity rather than flawed core technology.
Overall, with its talented developers, Solana seems well positioned to overcome past growing pains. A track record of smooth functionality could erase reliability fears. But execution risks remain in play.