Solana Near Yearly High After 27% July Gain and SOL Price ‘Double Bottom’

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29 Jul 2024

Solana (SOL), one of the most prominent cryptocurrencies in the market, has captured significant attention with its impressive performance in July 2024. The digital asset experienced a remarkable 27% gain, positioning it near its yearly high.

This surge in value, along with the emergence of a 'double bottom' pattern, has raised anticipation among investors and analysts alike.

This article delves into the factors contributing to Solana's price movement, the role of liquid staking in the network's growth, and the potential outlook for SOL in the coming weeks.

The Surge in Solana's Value: A Closer Look at the Numbers

July Performance and Yearly Highs

As July draws to a close, Solana's SOL token is on track to end the month with an impressive 30% return. This surge has brought SOL close to its yearly high of around $210, a significant milestone that reflects the growing confidence in the Solana network.

The recent price action suggests that SOL is poised to test this high, with the potential for further gains if current trends continue.

SOL/USD Daily Chart Analysis: According to TradingView data, SOL's price has breached a bullish double-bottom pattern, with overhead resistance currently at $202. This pattern is often seen as a bullish indicator, suggesting that SOL could continue to rise if it breaks through this resistance level.
Price Correction and Support Levels: Despite the overall positive momentum, Solana has experienced a correction, with the price dipping below $190. Key support levels are identified around $180, and a failure to hold above this support could lead to a retest of the previous swing low at $165.

Market Sentiment and Analyst Predictions

Market sentiment surrounding Solana remains optimistic, bolstered by its strong performance relative to other cryptocurrencies.

Notable traders, such as Trader Wick, have highlighted SOL's consistent outperformance, particularly during market rallies.

Wick pointed out that SOL is "breaking out of resistance on a breakout arrow setup," a technical pattern that typically signals the start of a new trend.

The Role of Liquid Staking in Solana's Growth

Understanding Liquid Staking

Liquid staking has emerged as a pivotal factor in the Solana ecosystem, significantly boosting the network's on-chain activity and total value locked (TVL).

Unlike traditional staking, where tokens are locked up and rendered illiquid, liquid staking allows users to stake their tokens while still maintaining liquidity.

This is achieved by issuing liquid staking tokens (LSTs) that represent the staked assets, which can then be used in decentralized finance (DeFi) applications or traded on the market.

Key Players: Jito and Marinade: Among the most influential projects in this space are Jito and Marinade, which offer LSTs known as JitoSOL and mSOL, respectively. These tokens have become central to the DeFi ecosystem on Solana, providing users with the flexibility to earn staking rewards while leveraging their assets for additional yields.

Growth in TVL and User Activity

The impact of liquid staking on Solana's growth is evident in the network's metrics. According to Cointelegraph, Solana's TVL surged by 10%, reaching approximately $5.42 billion.

This increase was accompanied by a rise in transaction volume and overall on-chain activity, underscoring the growing utility and adoption of the network.

Staked LSTs Surge: Data from Dune Analytics shows that the total amount of SOL deposited in liquid staking derivatives more than doubled in 2024, rising from 163,827 to 807,712 SOL. This represents a 393% increase, highlighting the rapid growth and popularity of liquid staking on Solana.

Active Users and Engagement: The rise in TVL and staked assets has been paralleled by an increase in daily and weekly active users. Token Terminal reports a 21% increase in daily active users and a 59% rise in weekly active users, indicating that more participants are engaging with the network, beyond just staking activities.

Analyzing the Double Bottom Pattern: What It Means for SOL

The Double Bottom Pattern Explained

The double bottom pattern is a technical analysis indicator that often signals a bullish reversal in price.

It is characterized by two distinct lows at roughly the same level, separated by a peak. In the case of Solana, this pattern has formed as the price rebounded from its recent lows, suggesting that the market has found a strong support level.

Total staked LST chart. Source: Dune Analytics

Potential for Upward Momentum: The emergence of a double bottom pattern in SOL's price chart suggests a strong possibility of continued upward momentum. If the price can break above the resistance level at $202, it may pave the way for SOL to challenge and potentially surpass its yearly high of $210.

Risks and Considerations: While the double bottom is generally considered a bullish signal, it is not without risks. The pattern's reliability depends on market conditions, including overall sentiment and external factors that could influence price movements.

Key Levels to Watch

For investors and traders, it is crucial to monitor key levels in SOL's price action. The immediate resistance at $202 and the psychological barrier at $210 are critical areas that could determine the near-term trajectory of the token. On the downside, maintaining support above $180 is essential to prevent a deeper correction towards $165.

Looking Ahead: The Future of Solana and SOL

SOL/USD daily chart. Source TradingView

Catalysts for Continued Growth

Several factors could contribute to sustained growth in Solana's ecosystem and the value of SOL. The network's focus on scalability, low transaction costs, and high throughput positions it well in the competitive blockchain space.

Additionally, the continued expansion of its DeFi and NFT ecosystems, coupled with increasing institutional interest, could provide further upside.

Technological Advancements: Solana's commitment to innovation, including potential upgrades and enhancements to its protocol, could improve performance and attract more developers and projects.

Partnerships and Integrations: Strategic partnerships and integrations with other blockchain projects and traditional financial institutions could enhance Solana's utility and drive adoption.

Potential Challenges and Risks

Despite the positive outlook, Solana faces challenges that could impact its growth and stability.

These include regulatory uncertainties, competition from other blockchain networks, and potential technical vulnerabilities.

Regulatory Environment: The evolving regulatory landscape for cryptocurrencies poses risks, particularly in terms of compliance and potential restrictions on DeFi activities.

Market Volatility: The broader cryptocurrency market's inherent volatility can also affect Solana's price, leading to potential periods of significant fluctuation.

Conclusion

Solana's strong performance in July 2024, marked by a significant price gain and a bullish double bottom pattern, has positioned it near its yearly high. The network's growth is underpinned by a robust liquid staking ecosystem, which has significantly increased on-chain activity and user engagement. As Solana continues to innovate and expand, it holds the potential for further growth. However, investors should remain aware of the associated risks and market dynamics. The coming weeks will be critical in determining whether SOL can break through its resistance levels and establish new highs, solidifying its position as a leading player in the blockchain space.