Why is Solana (SOL) price down today?

Solana’s (SOL) price is down today, falling 9.25% to reach its two-week low of $168. This decrease is part of a broader downturn within the cryptocurrency market, which experienced an overall decline of 3.8% on April 5.

Key factors behind SOL’s price drop today include growing doubts over the Federal Reserve’s first interest rate cuts and reports highlighting transaction failures on the Solana blockchain

Solana’s transaction delay rumor

Recent Dune Analytics data indicates a significant spike in memecoin transaction failures on the Solana network. On April 4, over 75% of non-vote transactions did not succeed, marking the highest failure rate observed. 

However, Mert Mumtaz, CEO of Helius and a staunch Solana advocate, contested the narrative of a 75% transaction failure rate in an April 4 X post, arguing that the bulk of these failed non-vote transactions were due to “bot spam.”

In other words, the Dune Analytics data may not have indicated a systemic issue with Solana’s functionality. Nonetheless, the rumors alone have made SOL an underperformer compared to the rest of the crypto market on April 5.

Memecoin mania cools

Solana’s price decline today further coincides with sharp corrections across its top memecoins, namely Bonk (BONK) and Dogwifhat (WIF).

WIF and BONK have dropped approximately 13.2% and 9% in in the last 24 hours, respectively. The top loser, however, is the newly-launched Cat in a Dogs World (MEW) memecoin, which crashed 30% in the same period.

Solana’s positive correlation with its memecoin projects has grown strong recently. For instance, the daily correlation coefficient between SOL and BONK was 0.83 on April 5.

Meanwhile, its daily correlation coefficient with WIF came around 0.53, highlighting these projects’ impact on Solana’s current market dynamics.

Strong U.S. labor data winds down rate cut bets

As of April 5, U.S. Treasury futures data showed that the Federal Reserve won’t slash interest rates until September. For 2024, traders now anticipate only about 67 basis points in rate cuts, a more cautious outlook compared to the Federal Reserve’s hinted three-quarter point reduction. 

Following the latest improvements in U.S. labor market data, increased expectations for postponed interest rate cuts have emerged. The unemployment rate edged down to 3.8% in March from 3.9% in February, signaling the Federal Reserve’s capacity to maintain higher interest rates against the backdrop of a strengthening U.S. economy.

Related: Bitcoin absorbs $100M+ ‘sell-side days’ as bears lose BTC price clout

Crypto investors often interpret higher interest rates as a negative signal for leading digital currencies, given such economic conditions have historically enhanced the appeal of safer assets.

Declining Solana’s market strength

Solana’s price decline today further takes cues from its declining strength in the crypto market.

As of April 5, the Solana Dominance Index (SOL.D), which measures SOL’s market capitalization versus the rest of the crypto market, dropped 5%. The index has dropped 9.5% since April 2, indicating an increasing capital rotation out of the Solana market to rival assets, namely Bitcoin (BTC). 

Solana technical analysis

From a technical analysis perspective, Solana’s price decline today is part of a pullback within its prevailing ascending triangle range, as illustrated below.

In an uptrend, ascending triangles are seen as bullish continuation patterns, suggesting a high chance for Solana (SOL) to bounce back from its pattern’s lower trendline. This potential rebound sets SOL on a trajectory toward the triangle’s upper trendline, targeting around $200, up 16.5%, by April’s end.

A decisive breakout could have SOL’s price positioned for $240 as its primary upside target. This level is measured after the triangle’s maximum height is added to the upper trendline.

Conversely, a drop below the triangle’s lower trendline risks invalidating the bullish continuation setup, putting SOL on the path toward its 50-day exponential moving average (50-day EMA; the red wave) near $160 — a 9.5% decline by April’s end.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.