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Solana exited an ascending channel on May 20 and has since dropped by 13%. As the altcoin price aims to move below the 20-day Exponential Moving Average (EMA), SOL may face further decline due to increasing selling pressure. The double-digit drop in SOL price over the last three days has pushed it towards the 20-day EMA.
Why is Solana Dropping?
This situation, preparing to fall below the key average, may indicate an increase in SOL sales among market participants. A 20-day EMA is a short-term moving average that quickly responds to price changes and reflects an asset’s average closing price over the last 20 days.
An asset falling below this moving average can be a bearish signal because it means the asset’s current price is lower than the average price of the last 20 days. This is considered a shift towards the distribution of cryptocurrency.
The decline in SOL’s Money Flow Index (MFI) confirmed the increase in bearish impact, and this indicator measures the buying and selling pressure behind SOL price movement.
At the time of writing, SOL’s MFI data was below the neutral line of 50 at 48.84, indicating that selling activity has outpaced buying momentum among market participants.
Solana Chart Analysis
SOL price decline in the past few days has led to an increase in long liquidations in the altcoin futures market. Between May 20 and 23, futures SOL investors lost $19 million. Liquidations occur when an investor’s position is forcibly closed due to insufficient funds to maintain the position.
Long liquidations occur when an asset’s value suddenly drops, forcing investors with open positions in favor of price increases to exit their positions. Interestingly, despite this, SOL futures investors continue to demand more long positions. Funding rates remained positive at 0.014% at the time of writing.
If this trend continues and bulls regain control of the token’s spot market, SOL price could rise to $169.94. However, if selling pressure continues to increase, SOL’s next price level could be $151.95.
