Solana (SOL) recorded its second worst weekly return of 2024 at the end of August, at 19.14%. Previously, the biggest negative weekly ROI of 25.19% occurred a month earlier in July.
Solana OI up 20% as funding rates turn negative
Derivatives markets are currently driving price action as spot net inflows drop to $500 million in August SOL.
Last week, Solana’s open interest (OI) fell 12% in the 24 hours after the price dropped below $150. Since then, the price has fallen another 14%, but OI is up 20% in the market.
An increase in open interest during a market decline indicates that futures traders are shorting aggressively.
SOL price, aggregated open interest, funding rate. Source: Velodata
The negative funding ratio further confirms the bearish bias. The indicator has been negative for the past week, the longest stretch since October 2023. The current funding ratio of -0.001 is the lowest level since 2024.
SOL Weekly DEX Volumes Drop to 6-Month Low
The decline in on-chain activity on Solana has been ongoing for the past month, with the memecoin’s enthusiasm relatively fading away. Data from Dune Analytics shows that DEX volumes hit $7.7 billion last week, the lowest in six months for the ecosystem.
In March, Solana’s daily DEX volume was 50% higher than Ethereum’s, with 24-hour volume regularly exceeding $3 billion.
Solana DEX volume chart. Source: Dune Analytics
Analyst: “SOL/BTC Chart Looks Terrible”
Solana and Bitcoin showed an upward correlation in 2024, which caused this altcoin to outperform BTC in Q1 2024. This correlation has held up over the past few weeks as the market has moved sideways and down, meaning this altcoin is set to experience a larger decline than Bitcoin.
Independent trader Bluntz_Capital suggests that SOL/BTC may be headed for another downtrend. The analyst said in a post to X:
“Weekly sol/btc looks terrible, legit looks like it’s reached a decent peak with satisfaction and everything to me.”
SOL/BTC chart source: bluntz_capital. Source: X.com
Solana faces a major test at $127
The nearest major support level before retesting $100 is near $127.
Since April 2024, Solana has briefly fallen below $120 six times, but each time the altcoin has closed the daily candle above $127. This is also the lower limit of the accumulation zone (green box). What is different this time is that SOL has lost support at the 200-day EMA (orange indicator).
SOL/USD daily chart. Source: TradingView
Previously it closed above $127, but it recorded a daily close above the 200-day EMA. SOL closed below the EMA level for the first time since September 2023 for multiple days, further highlighting the bearish structure on the chart.
If Solana loses $127, the immediate target would be $110, which would be a liquidity sweep for this altcoin. A pullback from $110 would be ideal, which would be ideal for bulls.
However, if September is a sign of a prolonged bear market, SOL could retest the demand zone (blue box) between $98 and $104.
The worst case scenario for SOL is a retest of $100, which would mean a 22% correction and a new low for the altcoin.
So if Bitcoin is strong in Q4, Solana price will not fall below $100 in September.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.