Solana (SOL) dipped to some two-week low around $35.50 on This summer 26, mirroring downside moves elsewhere within the crypto market. Nevertheless, technicals shows that Solana’s cost flirts using the prospects of rising 40% in August.
SOL hits key inflection point
Ironically, the bullish setup for Solana emerges from a vintage bearish continuation pattern.
Around the daily chart, SOL’s cost continues to be consolidating inside what seems to become a “bear flag,” a technical pattern that develops throughout a downtrend and will get resolved following the instrument exits it with further cost drops.
The so-known as bear flag breakdown hasn’t happened yet. Rather, SOL continues to be holding the low trendline as support, raising options of the sharp rebound toward top of the trendline, as highlighted within the chart below.
The rebound setup exposes SOL to some potential rally toward $49.50 in August, up 40% from today’s cost. The $49-$50 level had offered as both support and resistance in May.
Solana network performance still an issue — investigator
The possibility bear flag rebound assists as interim relief to Solana bulls, given SOL’s overall bias remains skewed towards the downside.
Macro forces like the Fed’s hawkish financial policies and also the collapse from the $40 billion “algorithmic stablecoin” project Terra have sent the crypto market right into a tailspin. Consequently, Solana, like every other dangerous asset, has endured declines across its financial and network usage metrics in 2022.
For example, the typical quantity of daily transactions atop the Solana blockchain stepped by 17.6% in Q2/2022 in comparison to the previous quarter, based on data from Messari.
Meanwhile, Solana’s revenue dropped 44.4% quarter-on-quarter (also due to recurring network outages).
“As observed in 2021 and throughout Q1 and Q2, degraded network performance decreases network usage and cuts down on the network’s ongoing flow of revenue,” noted James Trautman, a investigator at Messari, adding:
“If Solana would still experience degraded performance that can last for a fabric period of time, a resulting continue fundamental usage may catalyze volatility and continue network value.”
Bear flag breakdown?
This mixture of macro and network-related concerns risk triggering the bear flag breakdown by September.
Related: All ‘Ethereum killers’ will fail: Blockdaemon’s Freddy Zwanzger
SOL’s decisive close underneath the flag’s lower trendline means more downside will probably the $21-$23 region, based on the technical setup highlighted below.
Quite simply, a 35%-38% drop from current cost levels.
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