Solana, Avalanche Prepare for Extreme Volatility

Ethereum's transition to Proof-of-Stake appears to have become a "sell the news" event, as tokens like Solana and Avalanche edge closer to a steep correction. 

Solana, Avalanche Prepare for Extreme Volatility
Shutterstock cover by NeoLeo (edited by Mariia Kozyr)

Key Takeaways

  • Solana and Avalanche have dropped 2% following Ethereum's Merge. 
  • Further selling pressure could trigger a significant correction. 
  • SOL and AVAX need to reverse course soon to invalidate the bearish thesis. 

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Solana and Avalanche appear to be at risk of a steep correction. These tokens need to reclaim vital support levels quickly to avoid further losses.

Trouble Ahead

Solana and Avalanche experienced a 2% correction over the past few hours, which correlates with Ethereum’s successful transition to Proof-of-Stake.

Solana appears to form a bear flag on its daily chart as the hype around the Merge fades. This technical formation anticipates that breaking the $30 support level can trigger a 70% correction. If validated, a spike in selling pressure could push SOL below $10.

Despite the pessimistic outlook, not everything is lost for Solana. The Layer 1 blockchain’s token needs to reclaim its 50-day moving average as support to have a chance of rebounding. Moving past this resistance level could help SOL rise to $48 or even to the 200-day moving average at $60.

Solana US dollar price chart
SOL/USDT daily chart. (Source: TradingView)

Avalanche also appears to be developing a bearish technical formation on its daily chart. AVAX could be forming the right shoulder of a head-and-shoulders pattern. A sustained daily close below $17 can increase the odds of a steep correction.

If this happens and Avalanche dips below the pattern’s neckline, a 40% correction to $11 becomes a strong possibility. For AVAX to advance higher, it must slice through the 50-day moving average to invalidate this bearish thesis. Doing so could induce a surge toward its 200-day moving average at $42.

Avalanche US dollar price chart.
AVAX/USDT daily chart. (Source: TradingView)

Given Solana and Avalanche’s bearish scenarios, it is imperative to wait for a decisive close below support or above resistance before trying to time their next major price movements.

Disclosure: At the time of writing, the author of this piece owned BTC and ETH. The information contained in this piece is for educational purposes only and is not investment advice. 

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