Altcoins Tumble as Bitcoin Corrects; Solana Faces Bearish Headwinds

Amidst a market slowdown, altcoins experienced a decline in dominance due to Bitcoin's drop and a shift in Bitcoin exchange-traded funds (ETFs) from inflows to outflows. Notably, Solana (SOL) faced a drop in on-chain metrics, including active addresses, new address creation, and transaction fees, raising concerns among long-term investors.

Altcoins Lose Ground as Bitcoin Corrects, Solana Faces Bearish Pressures

In the wake of Bitcoin's recent dip towards the $60,000 threshold, the cryptocurrency market has experienced a downturn, leading to a decline in the dominance of various altcoins. Last week, the market underwent a correction due to a shift from robust inflows into Bitcoin exchange-traded funds (ETFs) towards outflows. This reversal contributed to Bitcoin's decline, dragging altcoins down to their support levels in the process. Notably, after SOL's price fell below the $200 mark, a significant drop in crucial on-chain metrics has raised concerns among long-term investors.

Market Recovery and Liquidations

In recent hours, the cryptocurrency market has entered a phase of recovery, with Bitcoin's price climbing past $68,000, which has helped to revive numerous altcoins. Over the last day, the market witnessed total liquidations surpassing $180 million, with sellers liquidating more than $114 million in positions. Notably, Solana saw a substantial short squeeze, resulting in almost $9 million in short positions being liquidated.

Solana's Bearish Indicators

Despite its recent positive momentum, Solana faces potential challenges that could halt its progress, with bearish trends becoming apparent through on-chain data. Recent data indicates a significant decrease in demand for Solana as active addresses declined from 1.61 million to 1.33 million, pointing to a decline in user interaction. Furthermore, there has been a drop in the creation of new addresses on the Solana network, decreasing from 1.25 million to 1.01 million.

Additionally, a significant decrease in transaction fees for Solana has been observed, dropping from $4.83 million to just $2.07 million. This decline in fees might plunge investor interest, potentially increasing sellers' dominance on the SOL price chart.

SOL's Meteoric Rise and Future Prospects

Since September 2023, Solana's value has experienced a meteoric rise of over 1000%. This remarkable growth is mainly due to two key elements: the bullish trend of Bitcoin, with its price reaching $75,000, and the substantial buying of SOL after FTX's collapse. Just last month, Solana saw an impressive surge of 90%, recording the biggest increase of 2024.

Currently, the market trends are favoring buyers, with investors aiming to surge above the $200 mark in the next few hours. However, sellers are vigorously defending against an upward price movement beyond the key Fibonacci retracement levels, leading to a notable increase in the volatility of the SOL price.

Should attempts to break above the $200 resistance level falter, the main line of support is expected to be the ascending trend line at $170. Breaching this support could lead SOL's price to fall to a crucial level of support at $155 as seen on the 4-hour chart. A strong bounce back from the trend line might send the price towards the 20-day Exponential Moving Average (EMA). Clearing this barrier could establish a trading range of $190 to $210.

For the bulls to retain control over the market, it is essential to not only reach but also to maintain the price above the $200 mark.