Solana Looks Ready to Take a Leap in August

On July 26, the price of Solana (SOL) followed the general trend of the cryptocurrency market and dropped to a level that was not seen in nearly two weeks. Despite this, the technical analysis indicates that there is a possibility that Solana’s price would increase by forty percent in August.

 

The SOL Reaches an Important Turning Point

In a twist of fate, a traditional bearish continuation pattern has led to the formation of a bullish opportunity for Solana.

The price of SOL has been accumulating inside what looks to be a “bear flag,” an analytical pattern that emerges during a downtrend and becomes resolved after the asset departs it with further price declines. This pattern can be seen on the daily chart.

Solana Looks Ready To Take A Leap In August
Solana showing flag pater. Source: tradingview.com

The so-called collapse of the bear flag has not taken place as of yet. Instead, SOL has been using the lower trendline as support, which has increased the likelihood of a significant rebound toward the higher trendline (as shown in the chart below).

The rebound scenario makes it possible for SOL to stage a resurgence toward $49.50 in August, representing a 40 percent increase from the price on July 26. In May, the price range of $49 to $50 acted as a support and a resistance level.

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The Performance of the Solana Network Continues to Be a Problem

Given that SOL’s overall bias remains tilted toward the downside, the probable bear flag rally will provide Solana bulls with some relief in the short term.

The cryptocurrency market has been driven into a tailspin as a result of macro factors such as the hawkish monetary policies of the Federal Reserve and the failure of the $40 billion “algorithmic stablecoin” project Terra (LUNA), which has now been renamed Terra Classic (LUNC).

Consequently, Solana, like any other hazardous asset, has experienced reductions across the board in 2022 in terms of its financial metrics and network utilization.

According to data provided by Messari, for instance, during the second quarter of 2022, the typical number of daily transactions carried out on the Solana blockchain experienced a precipitous drop of 17.6 percent as opposed to the previous quarter.

Solana’s revenue plummeted 44.4 percent quarter-on-quarter (also because of recurring network outages).

Solana Looks Ready To Take A Leap In August
Solana finacials. Source: Messari

According to James Trautman, a researcher at Messari, “as observed in 2021 and throughout Q1 and Q2, degraded network performance diminishes network utilization and reduces the network’s continuing flow of income,” adding:

“If solana were to continue to experience degraded performance that last for a material amount of time, a resulting drag on fundamental usage may catalyze volatility and drag on network value,” the author writes. “If solana were to continue to experience degraded performance that last for a mater”

Breakdown of the bear flag?

The combination of macroeconomics and network security worries could set off the bear flag breakdown by September.

The fact that SOL decisively closed below the flag’s lower trendline indicates that there is likely to be an additional downside to the region between $21 and $23.

In other words, a price decrease between 34 and 39 percent is lower than the current level.

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Disclaimer: The views are those of the author alone and don’t represent the thoughts of the author and don’t represent the thoughts of the website: cryptoannals.com. Do your due diligence before taking any actions based on the analysis mentioned.

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