Solana (SOL) price is poised for a potential 95% crash — here’s why

The price of Solana (SOL) rallied roughly 75% two months after bottoming out locally near $25.75, but the token’s amazing upside move is at risk of being completely wiped out due to an ominous bearish technical indicator.

A large SOL crash setup appears

Called “head-and-shoulders (H&S),” the pattern appears when the price forms three consecutive peaks at the top of a common resistance level (called the neck). In particular, the middle peak (the head) will be higher than the other two shoulders, which are almost the same height.

Head and shoulders patterns resolve after price breaks below the neck. By doing so, the price falls by an amount equal to the distance between the top of the head and the neck measured from the breakdown point, according to a rule of technical analysis.

It appears that SOL has formed a similar bearish setup on its longer time frame charts.

SOL/USD weekly price chart with H&S breakdown. Source: TradingView

On the weekly chart, the token has formed the right shoulder of the overall pattern, suggesting a correction towards the neck of $27 during the second half of 2022. Meanwhile, a break below $27 could result in an extended correction towards $2.80.

In other words, a 95% price drop by the end of 2022 or early 2023, a setup also predicted by pseudonymous analyst “PROFIT BLUE”.

Is this a bear market rally?

Solana’s extremely sinister bearish setup emerges as it follows trends across risk markets, largely driven by the Federal Reserve’s hawkish response to inflationary pressures.

For example, SOL closed the week ending August 14 with a 10.5% gain, in line with Bitcoin (BTC) and the benchmark S&P 500. These markets reacted to a softer-than-expected US consumer price index (CPI), raising the possibility of that the Fed would slow the pace of interest rate increases.

SOL/USD and S&P 500 daily correlation coefficient. Source: TradingView

But many analysts have cautioned against these ongoing price rallies in the risky corners of the market, citing historical evidence of similar bear market pullbacks. So, SOL’s 75% rebound risk turns into a fakeout if the correlation with riskier assets remains positive.

From a fundamental perspective, Solana also faces extreme FUD due to repeated network outages and rumored centralization. However, the project’s backers have introduced new upgrades to fix these issues, as Cointelegraph discussed.

But even then, a 95% price crash is too “wild,” market analyst IncomeSharks suggests, saying it would mean Solana is a Terra ( LUNA ), now rTerra Classic ( LUNC )-like rug project.

Related: Fallout from crypto contagion is easing, but no market reversal yet

The next major decline could prompt SOL to explore bounce opportunities near a multi-year rising support trendline, as shown below.

SOL/USD daily price chart. Source: TradingView

In other words, SOL’s bearish continuation could last until the price reaches $20, down over 55% from the August 16 price.

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