Why is solana falling down?

Answered at Oct 30, 2024

Why is Solana Falling?

Solana, a prominent cryptocurrency, has experienced significant price declines recently. This report explores the reasons behind this downturn, focusing on key events and market dynamics.

Impact of FTX Collapse

  • FTX's Influence: Solana's price drop is closely linked to the collapse of the FTX exchange. FTX's founder, Sam Bankman-Fried, reportedly sold off large amounts of Solana to maintain liquidity during FTX's financial crisis. This sell-off triggered panic among investors, leading to a sharp decline in Solana's value (source).

  • Collateral Damage: Solana was considered collateral damage in the FTX debacle. As FTX struggled, Solana's price fell more than 30% in just 24 hours, a steeper decline than other cryptocurrencies like Cardano and Ethereum (source).

Recent Volatility

  • Price Fluctuations: Solana has faced notable volatility, with its price dropping over 7% in less than 24 hours. This volatility is part of a broader trend, with Solana losing more than 20% of its value after peaking at $67.63 on November 16, 2023 (source).

  • Market Correction: The recent price drop is seen as a minor correction following a significant surge of over 70% in the past 30 days. This correction aligns with a wider market adjustment affecting other major cryptocurrencies like Bitcoin (source).

Long-Term Concerns

  • Bearish Sentiment: Despite short-term bullish patterns, long-term indicators for Solana remain bearish. The price has been declining since reaching an all-time high of $253.30 in November 2021. The breakdown of support levels, exacerbated by negative news from the FTX collapse, has contributed to this bearish outlook (source).

  • Market Sentiment: There is a sense of schadenfreude in the market, with some investors believing Solana was unfairly supported by influential figures. This sentiment has fueled speculation that Solana's price could fall further, potentially reaching as low as $3, a price point with historical significance (source).

Potential Recovery Scenarios

  • Stabilization Hopes: In a best-case scenario, if the crypto market stabilizes and traders recognize they may have oversold Solana, a short-term bounce could occur. However, this depends on broader market conditions and potential resolutions to ongoing issues (source).

Conclusion

Solana's recent price decline is primarily driven by its association with the FTX collapse, market volatility, and bearish long-term trends. While there are hopes for recovery, the path forward remains uncertain, influenced by broader market dynamics and investor sentiment.