Bottom Ahead? Solana Paints Its First 'Death Cross' As SOL Losses 50% In January

Bottom Ahead? Solana Paints Its First 'Death Cross' As SOL Losses 50% In January

2022-02-01 | Selina Mathew

Bottom Ahead? Solana Paints Its First 'Death Cross' As SOL Losses 50% In January

Solana (SOL) is ready to draw its maiden "death cross" this week, prompting concerns that the company's current selloff would extend into February.

Serious danger of a sell-off

Importantly, the SOL price's 50-day exponential moving average (50-day EMA; red wave) would ultimately shut less than its 200-day EMA (blue wave), marking a bearish intersection known as a death cross, which often leads traders to sell. The danger emerges as SOL prepares to conclude January with an almost 50% loss — as of the month's closing day, the Solana coin was dropped by more than 2.50 percent to about $91, contrasted to roughly $180 at the beginning. Nevertheless, the factors that contributed to SOL's price drop remain mostly the same. Cryptocurrencies have slumped this month as traders try to predict how quickly the Federal Reserve will raise interest costs from near-zero levels to curb surging inflation and a tightening labour market. As a consequence, Solana's market valuation fell by half in January, between $55.19 billion to $28.79 billion, after it finished 2021 with a stunning 11,144 percent profit. This has led some financial advisers to predict a "cryptocurrency winter," a phrase alluding to pessimistic periods in the crypto space, similar to the ones observed in 2018 when the aggregate market cap of digital assets plunged by more than 80%. SOL's interim optimistic prognosis now hinges around its ability to maintain above $83, its present support level. A fall underneath the aforementioned price floor might result in the Solana token's subsequent pullback chance being delayed until $65. Both levels of support were critical in propelling the SOL/USD combination to a record high of over $260 the year before. Philip Gunwhy, the partner at Blockasset. co, remains long-term optimistic on Solana, noting its exponential expansion in the decentralized finance (Defi) and nonfungible token (NFT) sectors, which boosts SOL demand. Nevertheless, the expert cautioned that SOL's quick recovery in the brief term is dependent on the overall success of the cryptocurrency sector.

Prospect of rebound

Since this would be Solana's maiden 50–200-day EMA bearish crossover, there is no prior evidence to illustrate how SOL traders respond to a death cross. However, given that those who trade SOL have already been trading Bitcoin (BTC) in latest days, it is easy to see that death crosses do not scare them. For example, a 50–200-day EMA crossing in the Bitcoin market in June 2021 was accompanied by a slump near $29,000. However, the BTC price rebounded sharply a month afterward, finally hitting an all-time high of $69,000 in the beginning of November 2021. Likewise, owing to premature bearish warnings, death crosses in the S& P 500 (SPX) have lost their relevance during the last decade. For example, the past two bearish crosses among the SPX's 50-day EMA and 200-day EMA – in December 2018 as well as March 2020 – resulted in bottom patterns and robust market recovery. This increases the likelihood that the price of SOL's death cross will drop

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