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The Solana price is on the verge of a possible meltdown reminiscent of Terra‘s (LUNA) infamous collapse in 2022. A crypto analyst who identified this bearish trend in the Solana price action has projected a drastic crash to new lows at $22.
Solana Price Action Mirrors LUNA’s Catastrophic Collapse
A pseudonymous crypto analyst on TradingView named PizzaDriver has released a recent technical analysis of the Solana price action. The market expert predicts that Solana, the sixth-largest cryptocurrency by market capitalization, could soon decline to drastic lows.
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The analyst drew parallels between Solana’s current chart structure and the LUNA meltdown of 2022. The weekly chart highlights that Solana has formed a Double Top pattern, a classic bearish reversal signal from an uptrend to a downtrend. This pattern appears like the letter “M”, creating two peaks and a dip in between. This pattern also signifies deteriorating momentum in the Solana price, as the cryptocurrency has been facing severe volatility.
In addition to the Double Top pattern, Solana’s Relative Strength Index (RSI) has exhibited a bearish divergence. This means that while its price attempted to reach new highs, it was unable to due to underlying weakness. This same RSI bearish divergence was observed in LUNA before its infamous market crash, which triggered a decline to a zero level.
According to the TradingView analyst, if Solana fails to hold key support levels and breaks below them, it could trigger a widespread liquidity crisis that would send its price plummeting to $22, a significant historical support level last seen in 2022.
Adding to the already concerning price outlook, major institutional investors appear to have already sold their holdings and taken profits at price highs. Ahead of the bull run, these investors have reportedly reallocated funds into other somewhat safer coins like Ethereum (ETH) and Binance Coin (BNB), which have been seeing steady growth in on-chain activities and have risen in value over the week. This redistribution increases the risk of a rapid sell-off, further weakening Solana’s fundamentals.
Rug Pulls And High Fees Weigh On Solana
Beyond bearish technical indicators and price forecasts, the Solana ecosystem is currently experiencing a rise in investor dissatisfaction. PizzaDriver revealed that the Solana blockchain has become a primary space for meme coins and speculative trading. Additionally, there are allegations of rug pulls and project abandonment in the ecosystem, leaving investors with a sour experience.
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Many developers have allegedly created and launched projects, stolen investors’ funds, and disappeared, thus eroding trust in the network. Moreover, Solana’s transaction fees have skyrocketed, hitting record highs and contradicting its original appeal as a low-cost transaction alternative to Ethereum.
As a result, investors have begun shifting focus to long-term projects with transparent roadmaps, security audits, and strong partnerships. Due to its numerous ecosystem dilemmas, the TradingView analyst disclosed that Solana risks losing its dominant position unless it addresses these fundamental challenges.
Featured image from YouTube, chart from Tradingview.com