Solana

Is Solana a ‘buy’ with SOL price at 10-month lows and down 85% from its peak?

SOL price still faces headwinds from its Bitcoin correlation, macro risks as well as Solana’s downtimes.

Solana’s (SOL) price dropped on June 3, bringing its net paper losses down to 85% seven months after topping out above $260.

SOL price fell by more than 6.5% intraday to $35.68, after failing to rebound with conviction from 10-month lows. 

Now sitting on a historically significant support level, the SOL/USD pair could see an upside retracement in June, eyeing the $40-$45 area next, up around 25% from its June 4 price.

SOL/USD daily price chart. Source: TradingView

60% SOL price decline ahead?

However, a rebound scenario is far from guaranteed and Solana faces headwinds from trading in lockstep with Bitcoin (BTC), the top cryptocurrency (by market cap) that typically influences trends across the top altcoins. 

Notably, the weekly correlation coefficient between BTC and SOL was 0.92 as of June 4.

SOL/USD versus BTC/USD correlation coefficient. Source: TradingView

What’s more, Solana is likely to see even bigger losses than BTC if Bitcoin falls deeper below its current psychological support level of $30,000.

Meanwhile, the Federal Reserve looks determined to raise benchmark interest rates and reduce its balance sheet. As a result of this hawkish policy, riskier assets like Bitcoin have room to go lower, hurting Solana’s bullish prospects. 

Breaking below SOL’s current support level — around $35 — raises the chances for a decline toward the $18-25 range, which acted as a strong support area in March-July 2021, and preceded a 1,200% price rally, as shown below.

SOL/USD weekly price chart. Source: TradingView

This bearish scenario would put SOL almost 60% below the price on June 4.

Solana network outages

The bearish outlook for SOL also comes as the Solana blockchain faces repeated outages, thus leaving its network practically unusable for its key “dapps,” including lending protocol Solend and decentralized exchange Serum, for hours.

Solana’s latest software glitch appeared on June 1 that shut down the network for 4.5 hours. The blockchain’s biggest outage happened in January and was down for almost 18 hours.

The outages risk spooking investors to the benefit of Solana’s competition and have already coincided with several traders rotating their capital elsewhere.

Miles Deutscher, an independent market analyst, believes crypto investors have become cautious after witnessing the recent Terra fiasco. Nonetheless, the analyst asserts that Solana’s outages would decrease over time as the network matures.

Related: Alchemy announces support for Solana Web3 applications the day after blockchain halted

“But if they fail to stifle such events, then other L1s [layer-1 blockchains] will continue to eat away at its market share,” he noted.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Total crypto market cap risks a dip below $1 trillion if these 3 metrics don’t improve

Declining demand for Tether, negative futures premiums for altcoins and the lack of inflow to the crypto sector are all signs that a rocky road is ahead.

The total crypto market capitalization has ranged from $1.19 trillion to $1.36 trillion for the past 23 days, which is a relatively tight 13% range. During the same time, Bitcoin’s (BTC) 3.5% and Ether’s (ETH) 1.6% gains for the week are far from encouraging.

To date, the total crypto market is down 43% in just two months, so investors are unlikely to celebrate even if the descending triangle formation breaks to the upside.

Total crypto market cap, USD billion. Source: TradingView

Regulation worries continue to weigh investor sentiment, a prime example being Japan’s swift decision to enforce new laws after the Terra USD (UST) — now known as TerraUSD Classic (USTC) — collapse. On June 3, Japan’s parliament passed a bill to limit stablecoin issuing to licensed banks, registered money transfer agents and trust companies.

A few mid-cap altcoins rallied, but overall sentiment was unaffected

The bearish sentiment was clearly reflected in crypto markets as the Fear and Greed Index, a data-driven sentiment gauge, hit 10/100 on June 3. The indicator has been below 20 since May 8, as the total crypto capitalization lost the $1.7 trillion level to reach the lowest level since January 27.

Crypto Fear & Greed Index. Source: alternative.me

Below are the winners and losers from the past seven days. While the two leading cryptocurrencies presented modest gains, a handful of mid-capitalization altcoins rallied 13% or higher.

Weekly winners and losers among the top 80 coins. Source: Nomics

Waves rallied 109% after liquidity was brought back to Vires Finance and the Neutrino Protocol USDN stablecoin re-established its $1.00 peg after a $1,000 daily withdrawal limit was imposed on USDT and USDC.

Cardano (ADA) gained 19% as investors expect the “Vasil” hard fork scheduled for June 29 to improve scalability and smart contract functionality, incentivizing deposits to the long-hyped decentralized finance applications on the network.

Stellar (XLM) hiked 18.6% after the remittance giant MoneyGram partnered with the Stellar Development Foundation, launching a service that allows its users to send and convert stablecoins into fiat currencies.

Solana (SOL) lost 8% due to an unexpected block production halt on June 1, requiring validators to coordinate another mainnet restart after four hours of outage. The persistent issue has negatively impacted the network on seven occasions over the past 12 months.

Data points to further price pressure

The OKX Tether (USDT) premium is a good gauge of China-based retail crypto trader demand. It measures the difference between China-based peer-to-peer (P2P) trades and the United States dollar.

Excessive buying demand tends to pressure the indicator above fair value at 100% and during bearish markets, Tether’s market offer is flooded and causes a 4% or higher discount.

Tether (USDT) peer-to-peer vs. USD/CNY. Source: OKX

Tether has been trading at a 2% or higher discount in Asian peer-to-peer markets since May 30. However, the indicator showed a modest deterioration as it bottomed at a 4% discount on June 1. This data leaves no doubt that retail traders were caught off-guard as the total crypto capitalization failed to break the $1.3 trillion resistance.

Perpetual contracts, also known as inverse swaps, have an embedded rate that is usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

Accumulated perpetual futures funding rate on June 3. Source: Coinglass

Perpetual contracts reflected mixed sentiment as Bitcoin and Ethereum held a slightly positive (bullish) funding rate, but altcoin rates were opposite. Solana’s negative 0.20% weekly rate equals 0.8% per month, which is not a huge concern for most derivatives traders.

According to derivatives and trading indicators, the market is at risk of seeing more downside. Evidence of this can be seen in the slightly higher demand for bearish positions on altcoins and the evident lack of buying appetite from Asia-based retail markets.

Bulls need to display strength and hold the $1.19 trillion market capitalization support to avoid an increase in leveraged sellers, bearish bets and the subsequent negative price pressure.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Alchemy announces support for Solana Web3 applications the day after blockchain halted

The Web3 development platform and infrastructure provider will support Solana-built applications, despite the blockchain halting multiple times in 2022.

In an announcement published by Alchemy just one day after the Solana network temporarily halted on June 1, the Web3 development platform and infrastructure provider announced its support for the controversial blockchain.

Caused by a bug that made it impossible to reach network consensus, the Solana blockchain was halted for approximately four hours on Wednesday. This isn’t the first time the system has been compromised, as normal functionality has been halted five times already this year.

That didn’t seem to be a problem for Alchemy, which gives developers the ability to use its software and infrastructure in Solana-built applications. Now reportedly valued at $10.2 billion, the company is the creator of a Web3 API called Alchemy Supernode and a development suite used for monitoring and debugging called Alchemy Build.

This software has proved itself useful in the past when scaling and monitoring, with some of the company’s biggest partners including projects like nonfungible token marketplace OpenSea and liquidity protocol Aave (AAVE).

Francesco Agosti, chief technology officer and co-founder of Phantom, said his firm is excited about Alchemy’s Solana integration. “Their infrastructure and product suite has a proven track record for performance benefits,” he said. “This will be a game changer for Phantom and any other Solana developers who choose to start using Alchemy.”

Related: Chainlink launches price feeds on Solana to provide data to DeFi developers

This new integration goes to show that, despite recent outages and the price of Solana’s native SOL token falling 85% from its all-time high, it seems like the blockchain didn’t lose developers’ trust and so continues to be a valuable resource when building efficient Web3 applications.

Reliably unreliable: Solana price dives after latest network outage

Solana has suffered its fifth outage of 2022, and the year is only five months old. A bug-related consensus failure was the culprit this time.

The Solana network is not having a good year, having suffered full or partial outages at least seven separate times over the past 12 months.

A bug has knocked the Solana blockchain offline again as block production halted at 16:55 UTC on Wednesday. This latest outage lasted around four and a half hours as validator operators managed to restart the mainnet at around 21:00 UTC, according to the incident report.

Solana Labs co-founder Anatoly Yakovenko explained what happened in a tweet:

“Durable nonce instruction caused part of the network to consider the block is invalid, no consensus could be formed.”

“Durable transaction nonce” refers to a mechanism addressing the typical short lifetime of a transaction block hash according to the official Solana documentation. A bug in the feature caused nodes to generate different outputs resulting in consensus failure, which ultimately caused the latest period of downtime.

The network was restarted with this feature disabled, and Yakovenko added that fixes for the bug “will be out ASAP.”

Naturally, there was a fair amount of backlash from the community with comments like this filling up its feed:

“Get it together Solana. We should be past this already. I’m big believer but I’m even doubting at this point.”

CNBC crypto trader and Onchain Capital CEO Ran Neuner simply quipped:

SOL prices have taken a massive hit, tanking almost 14% over the past 12 hours or so in a fall below $40, according to CoinGecko. The network’s native token has now slumped 85% from its November 2021 all-time high of $260, and it is poised to slip out of the top 10 by market capitalization.

SOL/USD 24 hours. Source: CoinGecko

Solana, which has often been dubbed an “Ethereum killer,” has been fully or partially offline at least seven times since September 2021, when it suffered denial of service attack-related outages twice in the same month, according to the network uptime tracker.

The blockchain was plagued with problems in January when it suffered service disruptions and degraded performance for nine days out of the 31 in the month. Duplicate transactions were blamed for the second outage in January. In late April and early May, Solana was down again for almost eight hours due to nonfungible token minting bots overwhelming the network.

Related: Solana suffers 7 hour outage as bots invade the network

Additionally, Solana’s blockchain clock is slow and running 30 minutes behind real-world time. The status page notes, “On-chain time continues to run behind that of wall clocks, due to longer-than-normal block times.”