Solana (CCC:SOL-USD) has had a rough time lately. That’s especially true within the past week, where SOL crypto has fallen dramatically. For example, on Dec. 27, Solana was trading at $202.53, a recent peak. The cryptocurrency subsequently fell out of bed and as of Jan. 22, it was at $94.96.
This provides a special opportunity for hardcore crypto investors. For one, they have to be able to weather the influx of advisors and naysayers who predict that the bottom is still yet to occur.
Moreover, as Barron’s pointed out, the move on Jan. 21, by Russia to apparently ban all cryptocurrency put the market in “turmoil.” As a result, Bitcoin (CCC:BTC-USD) fell below the psychologically important $40,000 price level. The Wall Street Journal referred to people who view this price level as a “line in the sand” for the bulls on cryptocurrency.
Moreover, Ethereum fell below a red line of $3,000 per ETH crypto. Both of these events “unnerved” many cryptos, including Solana, according to Barron’s.
Solana and Crypto Market Crashes
As of Jan. 22, Solana had a market cap of $29.9 billion. SOL crypto had not been this cheap since the end of Aug. 28, when it was trading at $94.47. In the meantime, it surged to $258.93 by Nov. 5. Since then, though, the crypto has been tumbling to below $100.
That is a drop of 63.5% from its recent peak. It represents a drop in value of over $52 billion for Solana. However, keep in mind that is nothing compared to what has happened to Bitcoin. As Bloomberg points out, Bitcoin has now lost over $600 billion in market value from its 50% fall.
Of course, Solana could potentially fall below $90, which would be a major red flag event for Solana. For the time being, however, I don’t see that happening now.
For one, there is usually a rebound that occurs reasonably quickly after major drops in financial assets and securities like this. Based on my experience, it usually takes months for a major break in financial assets to begin to make a significant turnaround.
Moreover, according to A Wealth of Common Sense, half of all market breaks take less than one year to reach breakeven. The website runs a list of all the stock market crashes and shows how long they have lasted. Granted, the stock market is not necessarily the same thing as crypto market crashes, although the same principles apply.
What Could Be Causing the Crash
Not everyone thinks that the decline in Solana is over yet. For example, Coin Telegraph recently published an article indicating that SOL crypto could fall to $70 per token. Granted this is based on bearish chart pattern analysis, which is a technical, not fundamental, analysis of the cryptocurrency.
The article blames the decline in Solana on the U.S. Federal Reserve System’s decision to “unwind its $120 billion a month asset purchasing program followed by three or more interest rate hikes spread throughout 2022.”
The article blamed the Fed’s “loose monetary policies” for “assist[ing]” in pumping up cryptocurrency valuations, including Bitcoin (and others like Solana). The article also talked about a “head and shoulders” formation in the SOL crypto price.
As a recent Forbes article puts it, investors are scrambling to “sell off risk assets” as “central banks turn off money taps in tandem.”
What to Do With SOL Crypto
Regardless of whether SOL crypto will fall to $70 or not, it is not likely to stay there long. In fact, now is probably a good time to begin accumulating more SOL crypto.
One reason for this is to average down in your original cost of the crypto. In addition, for those who don’t already own SOL crypto, it looks like a pretty cheap entry point. This will be the case even if the price keeps falling, as it will provide another opportunity to buy the crypto cheaply.
The bottom line is that SOL crypto is getting cheap and could be close to the bottom now, which means it’s reaching a cheap price.
On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and Newsbreak.com and runs the Total Yield Value Guide which you can review here.
