Can SOL recover $170? Two pointers scream ‘buy’

Solana-based token SOL (SOL) hit a four-week low on June 11 as it tested the $145 support level. In four days, SOL has reduced the overall capitalization by 10% in the same period, the broader cryptocurrency market, less performance, a sharp 15.8% reduction. Despite this, macroeconomic instability has created a buying opportunity for SOL, according to two key indicators.

Macroeconomic events have a negative impact on the price of SOL

The US Federal Reserve (Fed) has delayed interest rate cuts as investors fear the stock market may be correcting itself following mixed economic signals. According to the CME FedWatch tool, traders now see a 48% chance it will stay the same through September, up from 39% a month ago. After hitting a peak on June 7, the S&P 500 index has edged higher as investors await comments from Fed Chairman Jerome Powell on June 12.

Stuart Kaiser, Citigroup's head of U.S. equity trading strategy, said a consumer price index (CPI) increase of more than 0.4% from last month could trigger a broad market sell-off and send the S&P 500 down 1.5% to 2.5%. By Yahoo Finance. Keyser also warned that the S&P 500 could experience its biggest one-day move since March 2023. US inflation data, scheduled for release on June 12, will be eagerly awaited ahead of the Fed's rate decision.

Although SOL investors do not support cryptocurrencies other than Bitcoin (BTC) and Ether (ETH), they hope to find a listing of US exchange-traded funds (ETFs). Brian Kelly, founder and CEO of BKCM Digital Asset Fund, considers SOL a strong candidate for an ETF, especially after Bitwise Chief Investment Officer Matt Hogan discussed how Solana's real-world applications will attract institutional investors.

The recent underperformance of SOL can be attributed to issues in the network, particularly regarding the maximum extractable value (MEV). Validators on the Solana network were found to be exploiting traders through sandwich attacks – manipulating transaction prices to make profits that hurt retail investors. In response, the Solana Foundation excluded these verifiers from its delegation program, reducing incentives for such harmful practices.

Despite a massive 15 percent drop in four days, several indicators suggest investors' confidence in SOL remains intact. Once macroeconomic conditions stabilize, this sentiment may soon turn positive.

Solana's chain and derivative parameters indicate the potential upward

Notably, demand for SOL futures remains unaffected by the ever-decreasing market conditions. Perpetual contracts, also known as reverse swaps, exhibit embedded momentum, which, when positive, indicates an increase in leverage between long (buy) positions. Conversely, a negative funding ratio suggests greater leverage among short (sell) positions.

The data showed that the SOL funding rate was flat at 0.01% in the eight hours since June 8, which translates to about 0.2% for the week. Following a 15% price drop in SOL, the stability of demand between bullish and bearish positions is an indicator of market resilience. If the bulls are used excessively, one will see a significant increase in the amount of funding, which is not the case at the moment.

On-chain data from the Solana network shows an increase in user numbers and transaction volume. While some analysts believe that Solana's low fees may encourage data usage, this issue is not unique to Solana and affects other platforms such as Ethereum layer-2 solutions and BNB Chain.

Related: Crypto ‘the most difficult thing' in software history – Consensys CEO

Solana is currently the fourth largest blockchain in terms of 24-hour active addresses connected to decentralized applications (DApps) with significant activity on platforms such as Jupiter Exchange and Radium. But the network's daily trading volume of $119 million is significantly lower than Polygon's $292 million and Arbitrum's $1 billion.

Despite falling to $145 on June 11, SOL Derivatives and the Solana Network have remained stable, indicating that traders and users are not ready to give up. Especially if the Solana Foundation's efforts to reduce the Maximum Expenditure Value (MEV) impact improve the overall user experience, the possibility of SOL taking back the $170 price seems possible.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.