Solana (SOL) is witnessing a price correction after rallying over 100% in December. SOL’s decline appears to be the result of profit-taking and capital rotation into Ethereum’s (ETH) token.
Overbought correction
On Dec. 28, SOL’s price has fallen to $101.50, three days after reaching $126.50, the highest level since April 2022.
It is evident that traders have started booking profits after Solana’s latest price rally. One indicator suggesting this is SOL’s daily relative strength index (RSI), which crossed above 70, or “overbought” earlier in December.
For instance, Solana’s richest investors have recently started selling their SOL holdings. On Dec. 28, just around Solana’s 5% daily drop, someone deposited 303,756 SOL worth $32.8 million to Binance, potentially boosting sell-side pressure.
A whale deposited 303,756 $SOL($32.8M) to #Binance today, possibly selling it for profit.
The whale withdrew 423,754 $SOL($28.18M) at $66.5 from #Binance in the past 1 month.
And still has 119,998 $SOL ($12.44M) staked, the profit exceeding $17M!
This whale also withdrew… pic.twitter.com/Sptfj7uUIa
— Lookonchain (@lookonchain) December 28, 2023
Solana’s top rival gains momentum
Solana’s price drop today coincides with gains for its top layer-one (L1) blockchain rival, Ethereum.
Related: Why is Solana (SOL) price up this week?
Notably, ETH price has climbed 12.35% to around $2,450 during SOL’s price correction. As a result, the SOL/ETH pair has plunged 23.75% this week, suggesting capital rotation from SOL to ETH.
Solana TVL drops by 2M
SOL’s price drop on Dec. 28 follows a period of decline in the total-value-locked (TVL) across the Solana dapps ecosystem.
Notably, Solana’s TVL has dropped by 2 million SOL (~$200 million) since Dec. 20, according to DeFi Llama. Less SOL locked in Solana’s applications means more supply elsewhere, including crypto exchanges, which can also increase sell-pressure on the market.
Solana price analysis
Solana price technicals suggest SOL/USD is overbought even on larger-timeframe charts, raising the possibility of a correction or consolidation period in January.
The bears will attempt to close the price below its 0.382 Fibonacci line support near $100, opening the door for the next big support level at the 0.236 Fibonacci line ($68.5), down 35% from current levels.
Conversely, the bulls will aim for a decisive weekly (and yearly) close above the 0.5 Fib line near near $130. Flipping this level into support could propel SOL price to $150 by February.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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