Solana pulling back after stunning 2023 rally!

By ForexTime 

• Solana skyrocketed by as much as 1155% this year
• Technical pullback warranted after such eye-watering gains
• This crypto still holds year-to-date gains of about 950% despite recent drop
• Solana likely surged as crypto sector recovers from FTX/SBF saga, amid Bitcoin ETF hype
• Further declines may hark back to key support levels from Q1 2022, before potentially pushing back higher

Of the 11 cryptocurrency CFDs offered within the FXTM universe, this year’s standout performer is clearly Solana!

Solana is a blockchain, featuring its SOL payment token, that’s touted for its high speeds (can process a lot more transactions per second) and low fees, which enables the creation of decentralized applications.

At the time of writing, and with only a handful of trading days left in 2023 …

Solana has a year-to-date climb of 952%!

Its year-to-date advance had reached as high as 1,155% earlier this week, before undergoing a technical pullback in recent sessions.

Solana’s 14-day relative strength index (RSI) is now on course to dip back below the 70 threshold which marks “overbought” conditions.

Why has Solana surged this year?

There are a few major reasons being bandied about for Solana’s stunning rise in 2023:

1) Solana moving on post-SBF/FTX

The disgraced founder of the FTX exchange, Sam Bankman-Fried a.k.a. SBF, had previously publicly advocated the merits of the Solana blockchain.

Hence, markets had associated Solana with SBF.

When SBF and FTX fell hard in 2022, so too did Solana, with the crypto losing almost all (94.1%) of its value last year.

But as the crypto world took strides in moving beyond the FTX carnage, so too has Solana’s fortunes recovered.

2) Alt-coins resurgence

Besides Solana, other alt-coins have also have a year of recovery.

The likes of Avalanche, Chainlink, and Cardano also respectively posted triple-digit year-to-date gains!

Cryptocurrencies, overall, are enjoying a resurgence, thanks to the rising anticipation surrounding a first-ever Bitcoin exchange-traded fund (ETF) that could be approved by the US Securities and Exchange Commission (SEC) as soon as January 10th, 2024.

Such excitement surrounding that first-ever Bitcoin ETF has spilled over into the broader crypto universe, and helped push prices higher.

3) Fed pivot in 2024 encouraging risk appetite

Looking at the Solana chart above, its steepest ascent appear to have commenced after the Federal Reserve’s (US central bank) latest policy meeting in mid-December.

Fed officials forecasted several rate cuts in 2024!

Riskier assets, including stocks and even cryptos, have rejoiced at the prospects of the US central bank lowering its benchmark rates, with the first rate cut expected to occur in March.

After all, lower interest rates have the potential to boost liquidity across global financial markets.

And as we know …

Market liquidity is a core pillar for crypto prices to move higher.

Hence, in light of the market’s forward-looking nature (today’s prices reflect tomorrow’s expectations), existing market participants have pushed crypto prices higher recently, in tandem with other riskier assets including the SPX500_m and the NQ100_m indices, on hopes for improved market conditions in 2024.

Though to be clear, liquidity within crypto markets are still yet to recover to levels prior to the crypto winter of 2022.

Where to next for Solana prices?

At the time of writing, Solana appears to be currently testing support around the $105 region.

Just this past Tuesday, Solana had already bounced off the psychologically-important $100 mark in a rather violent Boxing Day session.

Should the $100 fail at the second time of asking, traders may have to hark back to price action from Q1 2022 to draw further lines of support.

If the ongoing pullback is extended further …

Solana may eventually see stronger support around the psychologically-important $80 region.

However, once the ongoing technical pullback has run its course and the froth has been cleared from its eye-watering surge this year, the eventual equilibrium price may form a stronger base from which Solana can move higher.

Further gains for Solana however may require that the appetite for cryptos can make a sustainable comeback, especially if the positive inflows into that Bitcoin ETF does materialise.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com