$12 billion wiped from Solana (SOL) in a day

Solana (SOL) has been something of an early marvel of the 2024 cryptocurrency bull market, as it was one of the first tokens to make substantial moves already late last year.

Though it entered a protracted period of stagnation in March, it followed many other assets into the post-election rally, even recording highs above $257 in late November – no small feat for a cryptocurrency that stood at about $20 just over one year ago.

Still, despite the undeniable successes in the last 14 months, SOL proved unable to resist the great downturn that started on December 18, 2024, and it is, in the last 7 days, 19.43% in the red with its press time price of $182.19.

SOL 7-day price chart. Source: Finbold

Furthermore, Solana’s market capitalization plunged about $16 billion since the evening of December 18 – the time the downturn began in earnest – and $12.5 billion from where SOL stood just 24 hours earlier to the December 19 valuation of $87.4 billion.

Why Solana is crashing

The majority of SOL’s downturn cannot, however, be attributed to the token itself as it emerged as a reaction to the Federal Reserve’s rather hawkish outlook for 2025, made public on the evening of December 18.

Specifically, despite lowering interest rates by the expected 25 basis points (BPS), the Fed raised its inflation forecast for next year from 2.1% to 2.5% and revealed fewer cuts are in the cards in the coming 12 months than was anticipated.

The reaction to such statements was not confined to Solana – or to the cryptocurrency market as a whole – and numerous assets reacted violently. For example, the U.S. stock market erased $1.5 trillion before the closing bell on Wednesday, and even gold – traditionally regarded as a safe-haven asset – plunged more than 1% in the immediate aftermath.

As it turned out, however, the effects of the news were particularly sticky for digital assets – something of an unexpected development given cryptocurrencies were the first to show signs of recovery.

Looking at Solana’s valuation in the last seven days, the trend becomes quite clear. After the initial plunge from a $103 billion market cap to $69.6 billion, SOL recovered to $101 billion, only to again fall toward $90 billion.

This motion was, by press time, repeated once more as the token’s valuation rose $95 billion in the night between December 19 and December 20, only to fall once more to its press time level of $87.4 billion.

SOL market cap 7-day chart. Source: CoinMarketCap

What¡s next for Solana?

Looking ahead, it is somewhat unclear when and if the Solana rally will reignite. The next move might, in fact, be decided within hours as the token is trading just cents away from its nearest support zone, and should there be a continued decline, it would likely test the subsequent levels close to $175 and $165.

Should SOL bounce off of the nearest zone, it would have a relatively clear upward path until reaching about $208 – the nearest significant resistance point. 

Furthermore, despite the current trends being mostly bearish, Solana’s relative strength index (RSI) has fallen to 40.89, which, while neutral on its own, is rather close to ‘oversold’ territory and, therefore, close to a likely bullish pivot.

Such a situation might be particularly pointed once a long-term analysis – reported by Finbold on December 11 – demonstrates SOL has been forming a multi-year ‘cup and handle’ pattern that could, eventually, send it rocketing toward $4,000.

Featured image via Shutterstock