Key Points
- The SOL/ETH ratio has plummeted to a six-week low due to Ethereum’s outperformance.
- Solana is experiencing a period of consolidation due to a decrease in buying activity.
The performance of Solana [SOL] has been underwhelming in comparison to Ethereum [ETH], resulting in the SOL/ETH ratio dropping to a six-week low of 0.058.
Solana’s lackluster performance is a stark contrast to the broader altcoin market’s gains, and it’s the only top ten cryptocurrency to have experienced a loss over the past week.
SOL/ETH Decline
The decrease in the SOL/ETH ratio indicates that Ethereum is outpacing Solana in terms of gains. This decline has been linked to the formation of a bearish head-and-shoulders pattern.
The bearish trend has pushed the SOL/ETH ratio to a support level of 0.058, a level last tested by SOL in late October before a rally commenced. The future of this trend is largely dependent on Solana’s buying activity.
Decrease in Buying Activity
Solana’s price has been consolidating between $225 and $243 over the past week due to a lack of robust trading activity. The falling Chaikin Money Flow (CMF) and a downtrend in the Relative Strength Index (RSI) have also indicated a decrease in buying activity.
If this selling activity continues and is not offset by buyers, Solana could potentially succumb to bearish trends and experience a downward breakout.
The meme coin launchpad Pump.fun has reportedly transferred 100,000 SOL, worth $23.45 million, to the Kraken exchange, which could further contribute to Solana’s underperformance against Ethereum and other altcoins if these coins are not absorbed by buyers.
Bearish Market Sentiment
The Long/Short Ratio for Solana reveals a bearish market sentiment, with the ratio dropping to 0.89. This suggests that a majority of traders have taken leveraged short positions on the altcoin, anticipating a further decline.
However, this influx of short positions also increases the risk of a short squeeze, which could potentially lead to an unexpected price gain and trigger a cascade of short liquidations, pushing the price higher.
