Why Did Solana Price Spike Nearly 54% In A Week?

Key Takeaways:

  • Solana had best week among the top 20 cryptocurrencies in 2023 on BONK token hype.
  • SOL price spiked 54% in seven days.
Solana prices spiked on the back of a bullish pattern breakout and hype around the BONK token
Solana prices spiked on the back of a bullish pattern breakout and hype around the BONK token.

NEW DELHI (CoinChapter.com) — Solana (SOL) outperformed the top 20 cryptocurrencies by marketcap in the past seven days. SOL price spiked nearly 54% since Jan 3 to form a daily high near $16.9 on Jan 9.

Solana’s uptrend resulted from the hype surrounding the launch of Shiba Inu rival BONK by Solana developers. BONK launched in late Dec with a massive airdrop aimed at Solana developers and NFT collectors.

Per Bonk’s website, 50% of the total supply of 100 trillion tokens has been airdropped to developers and NFT creators, artists, and owners. However, Bonk’s launch party didn’t last long, as the meme token dropped 54% in less than 11 hours on Jan 6.

Daily active addresses on Solana spiked by over 40%
Daily active addresses on Solana spiked by over 40%. Source: Artemis

Furthermore, the hype surrounding the BONK token resulted in a spike in daily active user numbers for Solana. The number of daily active users of Solana increased by over 40% in two weeks, from nearly 294,600 wallets in late Dec to 525,200 wallets on Jan 8.

SOL Price Breaks Out Of Bullish Pattern

Meanwhile, another bullish cue might be behind SOL’s recent uptrend. SOL price confirmed a bullish technical pattern called the falling wedge.

In detail, the technical pattern forms when the price fluctuates inside a pair of falling trendlines that would converge down the slope. The outcome of such downside patterns is typically a price breakout to the upside.

Solana price broke out of a bullish technical pattern with a more than 80% price target
Solana’s price broke out of a bullish technical pattern with a more than 80% price target. Source: Tradingview.com

The upside target for the breakout is equal to the maximum distance between the falling wedge’s upper and lower trendlines. As such, SOL had a price target of $20.48, more than an 80% jump from the breakout point of $11.35.

Jan 9’s high of $16.9 means the Solana token has achieved nearly 49% of the pattern’s target.

Overbought RSI Might Dampen Solana’s Price Rally

However, Solana’s uptrend resulted in the token’s relative strength index becoming overbought, with a value of 71.58 on the daily charts. Traders consider RSI levels above 70 a sell signal, which usually attracts sellers to the market.

SOL price spiked 18.2% on Jan 9 to form a daily high near $16.9, but bears started selling, which resulted in the token paring gains. If the selloff continues, SOL price might drop to test support from its 50-day EMA (purple wave) near $14.2.

SOLUSD daily chart with RSI. Solana price rally might reverse if the traders start selling due to overbought RSI
SOLUSD daily chart with RSI. Solana price rally might reverse if the traders start selling due to overbought RSI. Source: Tradingview.com

Breaching below immediate support could push the SOL price to needle below the 20-day EMA (red wave) and fall to $12.1 before recovering.

On the other hand, an uptrend would see SOL price face resistance near $17.8. Breaking and consolidating above immediate resistance might help Solana price break above its 100-day EMA (blue wave), and challenge resistance near $21.4 before downside corrections pare gains.

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