I hate to tell you I told you so. (When it comes to Solana (CCC:SOL-USD), admittedly, I didn’t). But in other ways the warning was in place. Today, there are “direct orders” to refrain from buying SOL. Let me explain.
Following a period of mostly unabated bullish animal spirits in cryptocurrencies, largely absent risk was reintroduced into the digital asset market.
Bitcoin’s (CCC:BTC-USD) rally of more than 75% since late September or Ethereum’s (CCC:ETH-USD) jump in excess of 80% have seen the crypto market’s two largest assets valuations shrink by 13% to 14%.
And corrections since the prior week’s highs have left some BTC and ETH bulls licking their wounds by as much as 18% to 19%, respectively. Could it get worse? Certainly.
A Quick Look At the Crypto Market
A strengthening greenback may find reinforcements in the coming days if history is any indicator. For some that might include declines that are now on the cusp of signaling bear markets. That’s according to technicians assigning 20% as the line in-the-sand warning the party is over.
Other bearish indications appeared to be in place a week ago. Nevertheless, that canary does bring us to Solana’s coin.
SOL has shed 28% despite its so-called “Ethereum Killer” features which promise to upend the market’s undisputed Dapp (decentralized app) and non-fungible token (NFT) champ.
Solana’s lightening quick and more productive smart contracts have been a hit with developers apparently. But unequivocally, SOL coin has been a massively popular vehicle for traders to buy.
While both BTC and ETH have done well for themselves in 2021, still intact returns of nearly 100% and 450%, respectively, look designed for widows and orphans in comparison to Solana’s staggering gain of more than 12,930%.
To be fair, SOL coin’s first several hundred percent could be seen as more of a parlor trick not unlike a no-name, single-digit nano-cap stock, which suddenly finds favor. Sound familiar? Think Reddit.
But make no mistake, Solana is much bigger than that meme circus in other ways.
Today’s $60 billion market cap puts SOL on par with the likes of diverse industry leading large-caps like Lululemon (NASDAQ:LULU), UBS (NYSE:UBS), Nio (NYSE:NIO) and CrowdStrike (NASDAQ:CRWD) among others.
The warp speed rally also makes Solana the sixth most valuable coin in a universe of more than 13,500 digital assets. But I’ll be honest, today that type of authority is a double-edged sword. And it’s not finished gutting some of the obvious and oblivious excesses still embedded in SOL coin.
Studying Solana’s Price Chart
Source: Charts by TradingView
Unless you’re an unlikely collector of NFT’s, a less-likely developer of Dapps or have unlocked a real world use for Solana other than as a trading vehicle, a sunny bull market has set on SOL coin.
Right now the straightforward read of Solana’s monthly price chart is the coin’s challenge of an uptrend wedged in-between two Fibonacci levels dating to its September low.
In turn, buying SOL coin on weakness as support is tested might seem reasonable.
And mark my words, if there’s a bounce of a couple to few percentage points, pundits with tails curled in tight will be out in force updating you with “the bottom” shortly after the fact. But that’s part of a still pending and larger problem facing SOL coin. The fear of missing out.
There’s ample historical precedent that today’s run-of-the-mill correction of 28% will turn into a larger bear cycle as they do so often with risk assets being touted as the next big thing.
At the moment, my best technical guesstimate is that the area in-between $140 and $170 is where an eventual and more meaningful low can be manufactured on the weekly, then monthly chart.
Still, I wouldn’t discount the possibility of $100 to $115 in SOL coin either before all is said and done. Ultimately, bearish cycles of that size are more common than bulls hellbent on the continuation of momentum give them credit for.
And, today, with SOL up early in the session, a sure-to-follow bullish cacophony of premature victory from the FOMO crowd needs to be smartly muted and avoided.
On the date of publication, Chris Tyler holds (either directly or indirectly) positions in Grayscale Bitcoin and Ethereum Trusts (GBTC, ETCG and ETHE). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
