Solana price faces decline: What’s behind today’s drop?

Solana (SOL) has dipped by about 3.85% today, landing at $142 as of April 26. This decline marks a continuation of a correction that began yesterday, with SOL previously peaking at around $160. Since then, its value has decreased by more than 11%.

This downturn is a culmination of several factors including unresolved technical issues within Solana’s network and bleak economic data from the U.S.

Network Congestion and Developer Challenges

Mert Mumtaz, CEO of Helius, a Solana-based development platform, recently addressed claims regarding the resolution of Solana’s network congestion issues. Contrary to a post by data analytics firm SolanaFloor on X, which suggested that the network’s problems were fully solved due to shorter transaction confirmation times, Mumtaz asserted that the operational challenges persist.

His statement came right as SOL hit its local high, and the token’s price fell roughly 11% following his tweet, highlighting the impact of network stability on Solana’s market performance. Historically, Solana has been susceptible to price drops linked to its network issues, with one incident leading to a nearly 14% fall after a network outage.

Economic Headwinds and Market Sentiment

The broader economic environment is also playing a big role in SOL’s current performance. The U.S. economy showed a sluggish growth of 1.6% in GDP for the first quarter of 2024, which was below expectations.

Meanwhile, core inflation has risen from 2% to 3.7% annually, diminishing the likelihood of near-term interest rate cuts. This economic scenario has led swap traders to scale back their expectations for Federal Reserve rate cuts in 2024 to about 33 basis points, a drastic reduction from the previously anticipated six quarter-point cuts.

Over the past month, SOL has faced a huge downturn, with its price dropping over 23%, as per CoinMarketCap. The price further slid to $148 in the past 24 hours, yet it has maintained some resilience over the past seven days.

This trend reflects a broader market downturn that has affected various digital assets since the recent Halving event on April 19th. Despite this, there remains a cautious optimism among investors that the current short-term market reactions do not necessarily predict long-term declines.

Solana’s price has recently fallen below the crucial $150 mark, yet many are hopeful for a rebound. This optimism persists despite the fact that during its last bull run, SOL failed to breach the 31.80% Fibonacci level at $165, indicating a possible further drop to lows around $100. However, there’s still potential for recovery fueled by increasing demand for SOL and a possible shift in market sentiment.

The belief in a potential mid-term surge following the Bitcoin halving suggests a broader market recovery could be on the horizon, benefiting SOL significantly. With this potential uptrend, some anticipate SOL could reach as high as $200 and the 61.80% Fibonacci level, possibly by the end of the month. Looking ahead to May, the market could see a general reversal, boosting SOL along with other cryptocurrencies.