The cryptocurrency Solana managed to recover a bit after the losses of the last few weeks as investors took advantage of their price opportunity. SOL managed to rise to almost $36 on June 16th but is currently trading at around $31. This puts the price about 30% above this week’s low. It has fallen 86% from its all-time high, bringing the total market capitalization of the cryptocurrency to about $11.5 billion.
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Fed raises interest rates
The price of Solana and other coins rose after the Federal Reserve’s decision to implement the largest interest rate hike in nearly three decades. In a statement on Wednesday, June 15th, the Federal Reserve said that it will raise the benchmark interest rate by another 0.75%. It is the highest hike since 1994.
Fed Chairman Jerome Powell also announced that the bank would continue to raise rates to fight inflation. He expects that the next hike will also be 0.75% and will take place in July. If it is actual, it would be the fastest subsequent rate hike in decades.
Historically, volatile assets like cryptocurrencies tend to underperform during a period of high-interest rates. This is also one of the reasons why the prices of Solana and other cryptocurrencies have plummeted in recent months.
SOL and other coins rebounded after the Fed raised interest rates. So did other assets, with futures tied to the Dow Jones and Nasdaq 100 indexes rising over 0.50%. This performance was due to the fact that the rate hike was already priced in.
Nevertheless, Solana is in trouble. The total value (Total Value Locked) of Solana’s DeFi ecosystem has plunged more than 37% in the last 30 days. More specifically, it has fallen to about $2.7 billion. A quick look at the ecosystem shows that only 11 DeFi applications in the ecosystem have a total value of $100 million or more. These include Solend, Serum, and Marinade Finance.
This performance is in line with those of other blockchain projects such as Ethereum, Avalanche, Cronos, Polygon, and Fantom.
Solana is also struggling because of regular outages of its platform. As a result, many potential developers have opted for other platforms. Meanwhile, the performance of Solana’s Web3 projects such as Brave and StepN has declined.
Solana Share Price Forecast
The SOL price has been in a strong downward trend for months. The coin was trading at around $35 today, above the descending trend line shown in green. It remains below the 50-day moving average, while the Relative Strength Index (RSI) has risen above the oversold area.
Therefore, there is a possibility that Solana will resume the downtrend in the coming days. This would mean that the rally is a “dead cat bounce”. If it is, the price will retest this week’s low at $26.36.
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First published in CRYPTO MONDAY, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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