Solana (SOL) Market Drops Over 50% as Trump's Tariff Announcement Sparks Fear

The cryptocurrency market is witnessing a sharp downturn, with Solana (SOL) facing a particularly precarious moment. After peaking earlier this year

Cryptocurrency markets are witnessing a sharp downturn, and Solana (SOL) is facing a particularly precarious moment. After peaking earlier this year, SOL has tumbled over 50% from its 2024 high, currently struggling around the $131 mark.

However, market analysts warn that if there’s no reversal in sentiment and macroeconomic conditions, the token could plunge further, potentially testing the critical $100 level.

The latest blow to risk assets came from former U.S. President Donald Trump’s unexpected announcement of sweeping auto tariffs. These proposed measures have sparked concerns over potential trade wars and economic turbulence, triggering a broad market sell-off. Bitcoin, altcoins, and even traditional equities suffered heavy losses following the announcement.

Economic analysts caution that if additional tariffs, dubbed “Liberation Day” tariffs, are implemented, they could push the U.S. economy into a recession.

Given the heightened risk-averse environment, cryptocurrencies, which thrive in bullish speculative markets, are experiencing intense downward pressure. Solana, in particular, has seen a 10% decline this month alone, and fears of macroeconomic instability could deepen the downturn.

Solana’s network, once renowned for its rapid transactions and low fees, is now facing mounting challenges. One of the major drivers of its past success was the proliferation of meme coins on the platform.

However, the collapse of several such projects has damaged investor confidence. Countless scams and rug pulls have left retail traders reeling from losses, further denting trust in the ecosystem.

DeFi protocols on Solana have also seen a decline in activity, with traders preferring alternatives like Ethereum and Binance Smart Chain (BSC).

Data from DeFi Llama shows that decentralized exchange (DeX) volumes on Solana have plummeted to $8.7 billion per week, lagging far behind Ethereum and BSC.

While certain tokens like Bonk and Popcat have managed a recent recovery of 10-20%, the overall market sentiment remains fragile.

Unless a sustained resurgence occurs, Solana’s network demand and fee revenue could continue decreasing, exacerbating the bearish outlook.

Solana’s price action Technical analysis reveals significant red flags. The emergence of a death cross in February, where the 50-day moving average fell below the 200-day moving average, signaled a long-term downtrend.

Currently, SOL is consolidating around $140 after a steep drop, forming a bearish flag pattern—a setup that often precedes further declines.

Traders are closely watching the critical $120 support level. If this level is breached, Solana could see a sharp drop, potentially testing the psychological $100 mark.

On the upside, resistance at $170 remains a major hurdle for bulls. A decisive move above this level could negate the bearish trend, but with macroeconomic uncertainties looming, the probability of such a reversal appears low.

Token Unlocks and Whale Movements: Further Downside Risks?

Another factor that could exert downward pressure on Solana’s price is the upcoming token unlocks. The FTX bankruptcy estate recently unlocked 11.2 million SOL tokens in March, flooding the market with additional supply.

Historically, such large-scale token unlocks have led to price declines, as increased supply outpaces demand, rendering the token cheaper.

Furthermore, reports indicate that large investors (whales) have been offloading their Solana holdings. On-chain data suggests significant transfers from whale wallets to exchanges, a move typically associated with impending sell-offs.

If retail investors follow suit and panic-sell, the downward pressure on SOL could intensify, increasing the likelihood of a drop to $100.

However, if buyers manage to push the price above the $170 resistance, it could open the door for a potential rally toward the $200 level, offering hope for a bullish reversal in the long term.

Finally, while Solana was once praised for its speed and low transaction costs, competition within the blockchain space has intensified, leading diverse developers and users to explore alternative platforms.

This includes Base, a Layer 2 scaling solution for Ethereum, and Avalanche, both offering comparable benefits in terms of low transaction fees, high throughput, and smart contract capabilities.

If network activity on Solana continues to decline, it could encourage capital and innovation to migrate to these competing ecosystems, ultimately weighing on SOL’s growth prospects.

As the dust settles on the tumultuous year in crypto, the stage is set for an epic showdown that will determine the fate of Solana and its ability to rise from the ashes of adversity. Only time will tell whether bulls or bears will prevail in this crucial battleground.