Solana (SOL) broke out of an upward trend on May 20 and has since dropped by 13%. Now approaching its 20-day Exponential Moving Average (EMA), SOL faces the risk of further decline due to increasing selling pressure.
Despite recent declines and the liquidation of long positions, positive funding rates suggest ongoing demand for SOL futures in long positions.
Solana (SOL) Faces Bearish Pressure Near 20-Day EMA
Solana (SOL) has experienced a significant drop in price over the past three days, bringing it close to its 20-day Exponential Moving Average (EMA). This key average, which reacts swiftly to price changes, is now on the verge of being breached, indicating heightened selling activity among investors.
The 20-day EMA represents the average closing price of SOL over the past 20 days. When SOL’s current price falls below this moving average, it typically signals a bearish trend, suggesting that recent prices are below the average over the specified period—a sign that selling pressure may intensify.
The decline below the 20-day EMA is often interpreted as a shift towards distribution of the coin, rather than accumulation, in the market sentiment.
Solana Analysis. Source: TradingView
The Money Flow Index (MFI) for SOL has also corroborated this bearish sentiment. The MFI, which measures the buying and selling pressure behind SOL’s price movements, currently stands at 48.84, indicating that selling activities have outweighed buying momentum. This further underscores the prevailing bearish influence on SOL’s market dynamics.
SOL Derivatives Market Sees Long Liquidations Amid Price Decline
The recent decline in Solana (SOL) has triggered a wave of long liquidations in its derivatives market, totaling losses of $19 million between May 20 and 23. Long liquidations occur when traders, expecting a price increase, are forced to close their positions as the asset’s value drops sharply.
Liquidations occur when traders cannot meet margin requirements to maintain their open positions. In SOL’s case, the decline in price led to over-leveraged traders losing significant amounts in a short period.
Despite the liquidations, SOL futures continue to show demand for long positions, indicated by positive funding rates of 0.014% as of now. This suggests that traders are still optimistic about SOL’s future performance, even amid recent market volatility.
Solana Funding Rate. Source: Coinglass
If bullish momentum returns and SOL’s spot market sees renewed buying interest, analysts speculate the price could potentially rally to $169.94, signaling a recovery from recent losses and a potential return to higher levels.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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