Solana (SOL) has faced a significant wave of selling pressure since hitting its all-time high of $295.83 on January 19. The decline has driven its price to multi-month lows, reaching levels last seen in October 2023. However, key technical indicators and on-chain data suggest that a potential recovery might be on the horizon for the altcoin.

Solana Hits Capitulation Phase – What’s Next?

Solana’s one-day chart reveals a concerning signal: the Relative Strength Index (RSI) has dropped below the 30 level for the first time since June 2023. This suggests that SOL is now deeply oversold, which could indicate that the selling pressure is nearing its end. Historically, when an asset’s RSI falls below 30, it often signals a potential reversal or price rebound as traders begin to view the lower prices as buying opportunities.

The RSI, a technical indicator used to assess whether an asset is overbought or oversold, shows that Solana has entered a possible accumulation phase, where demand could return if enough buyers are attracted to the attractive price levels. In previous instances of oversold conditions, SOL has experienced sharp recoveries, suggesting that a rebound could be imminent if market sentiment shifts.

Capitulation and Market Sentiment

Currently, market sentiment for Solana is notably negative. Crypto analyst Miles Deutscher observed that SOL is experiencing its worst bearish sentiment in over a year. This suggests that the market has entered what’s known as the “capitulation” phase—when investors, frustrated by ongoing losses, begin to sell off their holdings, potentially marking a bottom. Once the “paper hands” have exited, it often paves the way for buyers to step in at lower prices, reducing selling pressure and setting the stage for a potential recovery.

This situation aligns with classic market behavior where prolonged downward trends are often followed by periods of price stabilization or recovery. If buyers begin to accumulate SOL at these lows, the selling pressure could subside, leading to a potential price rebound.

Key Support Level at $136.62

At the time of writing, Solana is trading at $141.67, slightly above a crucial support level at $136.62. This support is seen as a key area where the price could stabilize, and if buying pressure returns, it may act as a springboard for SOL’s recovery. Should SOL manage to push through this support and move higher, it could target the next major resistance at $182.31. A successful break above this level might trigger further upward momentum, with potential for SOL to reach $222.14.

However, if the downtrend continues, there is a risk that SOL could dip further. A break below the $136.62 support could drive the price down to the $120.72 level, where additional support may be found.

Outlook for Solana

The current market conditions suggest that Solana is at a critical juncture. With its RSI under 30 and sentiment at a low, the market is signaling a potential turning point. If SOL can hold its ground at key support levels and buyers start to re-enter the market, a recovery could follow.

Given Solana’s strong fundamentals, including its high-performance blockchain technology and significant developer ecosystem, the long-term prospects for the coin remain positive. The immediate term, however, hinges on whether buying pressure picks up and whether the capitulation phase gives way to a new uptrend.

In summary, Solana’s RSI under 30 and its position at key support levels suggest that a potential recovery could be underway. If the market shifts and buying demand returns, SOL may begin its ascent toward higher resistance levels, potentially reaching new highs in the near future.