Solana [SOL] faces pullback retest at $20: Is a recovery likely

Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion.

• The pullback retest could offer new buying opportunities. 
• Sentiment fell, and funding rates turned negative, which calls for caution among bulls. 

Solana [SOL] bulls have successfully defended the $20 support throughout Q1 2023, except during the US bank run in mid-March. The US bank crisis saw it drop below $20, but rebounded at $16. However, SOL faced rejection at a key trading value of $23 and retreated to the $20 demand zone, which could offer bulls a lifeline. 

Read Solana’s [SOL] Price Prediction 2023-24

At press time, the Solana network continued to face increased competition. One of the most popular NFT collections on the network, y00ts, dumped it for Polygon [MATIC]. Similarly, the adjusted TVL on the chain has dropped from $400M in January to $144M as of 31 March, according to DappRadar. 

Can the bulls defend $20 support again?

Source: SOL/USDT on TradingView

SOL has been oscillating in the $20 – $26 range for the past three months. A false breakout in mid-March saw bulls push it back to the range. At press time, SOL operated in the lower range ($20 – $23). A previous pullback retest didn’t end up in a rally, which could call for patience after Bitcoin [BTC] dropped below $29k, heading into the weekend. 

SOL could rebound strongly if BTC reclaims $29k and offers new buying opportunities if bulls could defend the $20 support. However, bulls must clear a key hurdle at $21.25 to retest the Volume Profile Visible Range’s (VRVP) point of control (POC) of $23. This level is also a key sell pressure level that bulls must overcome to reach $26. 

A close below $18 could attract more bears and sink SOL to $16. The primary buying opportunity could exist at $20 if BTC surges. A second buying opportunity could open up if SOL rebounds at $16. 

The RSI was below 50 at press time, showing increased sell pressure. Similarly, the OBV (On Balance Volume) and CMF (Chaikin Money Flow) moved southwards, indicating declining trading volumes and increased sellers’ influence in the market at the time of writing.

Funding rates and sentiment fell

Source: Santiment

According to Santiment, SOL’s funding rates turned negative, while weighted sentiment fell to a neutral level. It shows demand for SOL dropped, but the neutral sentiment means no player had absolute leverage. 

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On the other hand, development activity dipped, which could dent investors’ confidence in the token and delay a strong recovery. 

In conclusion, SOL could recover if the bulls defend $20 support, but BTC’s price action and development activity calls for caution before making moves