Is SOL On The Verge Of Bullish Recovery? Solana Network Activity On The Rise

Solana could be ready to make merry this festive season. The cryptocurrency just concluded a bearish week during which it tanked by over 20%. Price chart analysis indicates the possibility of a bullish recovery.

Bullish expectations for the SOL cryptocurrency were on the rise during the weekend. The main reason for this was that price dipped into a noteworthy price range underpinned by Fibonacci retracement.

SOL demand is likely to make a comeback this week, within the $192.56 and $175.74 price range. This is because it falls within the 0.5 and 0.618 Fibonacci range, based on the low to high of the September and November rally.

Note that the RSI was almost in oversold territory at the time of observation. These factors could influence a liquidity resurgence. In addition, SOL price action already demonstrated that the bears had cooled off in the last 24 hours.

There were also signs of accumulation on Friday when price interacted with the lower range. Coinglass data confirmed the decline in sell pressure.

Assessing The State of Demand in the Spot and Derivatives Segments

Outflows in the spot market cooled down considerably after attaining the highest 2024 outflows at $162.37 million on 19 December. For context, outflows were down to $34.34 million in the last 24 hours at press time.

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The declining spot flows could pave the way for an easier bullish takeover this week. Demand for SOL has to be higher than sell pressure for a bullish outcome to happen.

Solana open interest was down to $4.46 billion on 22 December, compared to its $6.05 billion peak on 9 December. The open interest weighted funding rates were negative since Friday, reflecting on the bearish sentiment in the market.

The funding rates turning red suggests that there the number of short positions were on the rise. However, previous observations could signal that a bullish relief could be on the cards.

On the other hand, the negative funding rates may also signal that a substantial amount of traders anticipate bearish capitulation from the current range. SOL could still continue on its bearish trajectory this week if sell pressure is sustained or if the bulls fail to show up.

Will Organic Demand Come to the Rescue as Solana Network Activity Grows?

Solana TVL grew considerably in the last 12 months and managed to soar to a new 2024 high of 56.05 million SOL. The network has also been experiencing positive transaction growth.

Transactions peaked at 66.24 million transactions in the last 24 hours. This was the highest transaction count that Solana has achieved in the last 11 months.

These metrics signal that the Solana network is busier now than it was in November. The TVL growth confirms growing shift in favor of long term HODL.

It also suggests that the transaction activity could pave way for more SOL demand for gas fee settlement. In other words, organic demand was likely on the rise.

While growing network activity may contribute to SOL demand, it dwarfs the trading activity around the cryptocurrency. This means trading activity in the market ultimately determines which direction the market will swing.