Solana (SOL) recently hit a four-week low, testing the $145 support level on June 11.
Solana (SOL) recently hit a four-week low, testing the $145 support level on June 11. This came after a sharp 15.8% decline over four days, underperforming the broader cryptocurrency market, which saw a 10% drop in total capitalization during the same period. Despite the downturn, some indicators suggest that the current macroeconomic instability may present a buying opportunity for SOL.
Investor sentiment has been rattled by mixed economic signals, prompting concerns over a potential correction in the stock market. This uncertainty is influencing expectations around interest rate cuts by the United States Federal Reserve (Fed). According to the CME FedWatch tool, traders now see a 48% chance of rates remaining unchanged until September, up from 39% a month ago. The S&P 500 index, which reached a record high on June 7, has since plateaued, with investors eagerly awaiting comments from Fed Chair Jerome Powell on June 12.
Stuart Kaiser, Citigroup’s head of U.S. equity trading strategy, has indicated that a Consumer Price Index (CPI) increase above 0.4% compared to the previous month could trigger a broad market selloff. This could potentially lead to a 1.5% to 2.5% drop in the S&P 500. Kaiser also warned that the S&P 500 might experience its largest single-day movement since March 2023, with the U.S. inflation data set for release on June 12 being a critical factor ahead of the Fed's rate decision.
SOL’s recent underperformance can also be linked to network issues, particularly around maximum extractable value (MEV). Validators on the Solana network were found exploiting traders through sandwich attacks, manipulating transaction prices for profit at the expense of retail investors. In response, the Solana Foundation has excluded these validators from its delegation program, aiming to reduce incentives for such detrimental actions.
Despite the steep 15% drop, the demand for leverage through SOL futures has remained unaffected by the recent market decline. Data from Coinglass shows that SOL's funding rate has held steady at 0.01% per eight hours since June 8, equating to about 0.2% per week. This stability in the funding rate, despite a significant price drop, indicates market resilience. Typically, a sharp increase in the funding rate would suggest that bulls are over-leveraged, but this has not been the case for SOL.
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