The Solana price has lost momentum. The SOL token has dropped by more than 40% from its highest point this month, meaning it has entered a bear territory. It is trading at $130, bringing its total market capitalization to more than $39 billion, making it the 7th biggest cryptocurrency in the world.
DeFi meltdown
There are several reasons why the Solana price has declined sharply in the past few weeks. First, the decline is mostly because of the close correlation among cryptocurrencies. In most cases, altcoins tend to drop sharply after Bitcoin declines. This month, Bitcoin has declined from about $52,000 to the current $42,000.
Second, Solana has declined because of the recent 17-hour outage that affected the confidence of the network. In a statement, the Solana Foundation blamed the outage to a denial of service (DDoS) attack.
The attack happened after the Grape Protocol launched its IDO on Raydium leading to bots flooding the network. Therefore, there are concerns about whether some developers will avoid Solana following the outage. The statement said:
“One of the biggest benefits of blockchains is that, even in complete liveness failure for any reason, the validators are individually responsible for recovering the state and continuing the chain without relying on a trusted third party. “
Third, Decentralized Finance (DeFi) is an important part of Solana’s ecosystem. And recently, the industry has shown some weakness. Data compiled by DeFi Llama shows that the total value locked of most DeFi platforms has declined substantially in the past few days.
The TVL of Solana’s DeFi platforms has declined by more than 24% in the past seven days. This is a deeper decline than those of Ethereum and Binance. Some of the worst-performing Solana DeFi platforms are Raydium, Serum, Sunny, Saber, and SolFarm.
Solana price prediction
The daily chart shows that the Solana price has been under intense pressure in the past few weeks. The token has declined by more than 40% from its highest level this month. It has moved below the key 25-day and 50-day moving averages.
At the same time, Solana has formed a descending channel shown in black. The price is between this channel while the MACD has moved below the neutral level. Therefore, for now, the coin will remain in a bearish trend as long as it is below the two moving averages.
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