NOIDA (CoinChapter.com)—SOL, Solana’s native token, is down today after falling nearly 5% to a daily low near $142. The token has been on a downtrend since April 23, dropping over 11% from the day’s high near $160.
SOL bulls are trying to keep the token above the 100-day EMA (blue wave) trendline support. If the token breaches the trendline support, SOL price could drop to the 200-day EMA (green wave) support near $113.
Challenges in Network Performance and Technical Responses
Solana’s recent price decline is closely tied to persistent network congestion and technical challenges. The network has been under strain due to a surge in transactions, primarily driven by the rise of Solana-based memecoins. The surge in trading volumes has pushed the network to its capacity limits.
In response, Solana developers deployed updates, such as the release v1.17.31 and the subsequent v1.18, intended to address these scalability and performance problems.
Despite these efforts, the network has not fully recovered. Mert Mumtaz, CEO of Helius, noted that SolanaFloor’s claim that the network had resolved its congestion issues was false.
Mumtaz claimed that the developers made some improvements, but there still remained a lot to do, stating that there was a “bunch of work left to do.”
Network outages have plagued the Solana blockchain for some years. According to Dune Analytics, Solana’s transaction failure rate spiked to 75% in April. The blockchain platform’s outages have often caused a price crash for the SOL token.
External Economic Influences and Market Dynamics
External economic factors and market dynamics have also played a crucial role in the recent price movements of Solana’s native token, SOL.
The announcement of the US Consumer Price Index earlier this month, which reported a higher-than-expected inflation rate at 3.5% year-over-year in March, impacted broader market sentiments. The higher CPI data lowered the chances of the US Federal Reserve delaying its rate cut decision.
Moreover, the US GDP data resulted in a significant selloff of Treasury bonds. The US real GDP grew at a 1.6% annual rate in Q1 2024, down from 3.4% in the previous quarter.
The data and market reactions suggest that the Federal Reserve may be less likely to implement rate cuts soon. Traders now expect a cut as late as Dec. 2024. As such, the reduction in expected rate cuts reflects a market skeptical about the likelihood of easing in the near term due to inflation concerns.
The prospect of higher rates for a longer-than-anticipated period could be bearish for risk assets like cryptocurrency and stocks. The SOL price was likely reacting to the macro news.
