Solana's overbought correction has picked momentum after its mention in the SEC's latest lawsuit against Kraken. Is the SOL bull run finally over?
Solana (SOL) is seeing a price correction after rallying nearly 300% in recent months.
Why is Solana price down today?
As of Nov. 21, SOL's price was trading for $55, down 20% when measured from its local high of $60.50 established just five days prior. The decline mirrors similar moves elsewhere in the crypto market, with top coins, Bitcoin (BTC) and Ether (ETH), also down 2.2% and 5.5% from their local highs.
Let's discuss the major reasons behind Solana's slump.
SEC labels SOL a "security"
Solana's price decline coincides with the U.S. Securities and Exchange Commission's (SEC) latest lawsuit against the Kraken crypto exchange. In its filings on Nov. 20, the watchdog accused Kraken of breaking securities laws.
While doing so, the SEC labeled a bunch of cryptocurrencies as securities, including Solana. SOL's price has declined 10.25% since.
Other tokens named in the SEC lawsuit fell similarly, including ADA, whose price decreased 5.5% after the Kraken news.
The SEC's potential designation of SOL as a security may affect its availability on U.S. cryptocurrency exchanges, similar to the impact seen with XRP.
Overbought correction
SOL's price drop today is part of an overbought correction that began after its daily relative strength index (RSI) jumped above 70.
In addition, Solana's correction came after a period of growing divergence between its rising prices and falling RSI, indicating bullish exhaustion.
Over $6.5 million worth of longs liquidated
Solana's decline further coincides with $6.5 million worth of long liquidations across its derivative markets since Nov. 20. In comparison, nearly $2 million worth of shorts were liquidated.
When a long position is liquidated, the trader is compelled to sell, leading to increased selling pressure.
Is the Solana bull market over?
Price chart technicals suggest that Solana's price correction has begun near a key Fibonacci retracement level, which limits its upside bias in the coming months.
The 0.236 Fib line is near $67.40, which has acted as resistance since summer 2022.
The combination of these bearish factors raises SOL's potential of extending its correction in the coming days or weeks. That begins with a decline toward $47.50, a flipped-support level, followed by an extended selloff toward $30, if the former level breaks.
The $30-level, down 50% from current prices, coincides with Solana's 50-week exponential moving average (50-week EMA; the red wave) and the upper trendline of its previous ascending channel pattern.
Related: Crypto community responds to Kraken lawsuit, Deaton slams ‘dishonorable’ Gensler
Conversely, SOL's price could rebound ahead or after testing $47.50 to its year-to-date high near $68.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
