Solana (SOL) is holding steady above $120, sparking anticipation of a potential bullish recovery. However, amid a minor rally, there are growing concerns about the network’s future. While Solana is currently trading at $123.94, it has witnessed a 14% decline over the past week. As the crypto market stands at a crossroads, experts are divided on the possibility of a price reversal or further downturn for Solana.

The Bullish Recovery That Fizzled Out

On March 11, Solana saw a slight 5.98% increase, breaking a streak of five consecutive bearish candles. However, despite this short-term recovery, Solana has failed to establish a consistent bullish trend. Following the intraday pullback of 1.14%, the price is now hovering around $123.94. Some analysts believe this could be a retest of the previously broken $130 support level, which has now turned into a resistance zone.

Since hitting its all-time high of $295, Solana has dropped nearly 60%. This dramatic decline resulted in a “death cross” between the 50-day and 200-day exponential moving average (EMA), a bearish signal that often precedes further losses. More worrying is the potential crossover of the 100 and 200 EMAs, which would trigger another strong sell signal for SOL.

Solana’s Declining Real Economic Value (REV)

Brandon Farmer, an analyst at ZeroKnowledge Polygon, sheds light on the drastic drop in Solana’s real economic value (REV). Farmer explains that much of Solana’s previous growth was fueled by meme coin trading on decentralized exchanges. This speculative trading spiked demand for Solana’s block space, driving transaction volumes and increasing network fees. This “SOL wealth effect” resulted in higher liquidity, pushing the price of SOL up and attracting more traders to the ecosystem.

However, as the hype around meme coins wanes, trading volumes on the Solana network have significantly dropped. Solana’s weekly REV has plummeted by 90% from its peak, signaling a sharp decline in the network’s ability to generate sustainable transaction fees. Farmer notes that the influx of meme coin trading was unsustainable and speculative, leading to the current downturn in Solana’s economic activity.

Technical Concerns for Solana

Supporting the bearish outlook, analyst Gert van Lagen identifies a double-top formation on Solana’s weekly price chart. This technical pattern is often a sign of a potential trend reversal, with the price poised to fall lower. Van Lagen also points out that Solana’s failed non-vote transaction rate has risen to 75%, further indicating the network’s struggles.

Van Lagen warns that Solana could see a significant price decline, possibly falling below $1. The combination of a double-top pattern, rising transaction failures, and bearish divergence paints a concerning picture for the asset’s future.

Conclusion

While Solana’s price remains above $120 for now, there are increasing signs that its bullish recovery may be short-lived. The decline in meme coin trading and a 90% drop in Solana’s REV suggest that the network’s real economic value is weakening. Furthermore, the technical analysis signals a potential breakdown below key support levels, raising the possibility of further declines.

Investors are advised to closely monitor Solana’s price movements, as the current trend and declining activity on the network could signal further trouble ahead. As always in the volatile world of cryptocurrency, the outlook for Solana remains uncertain, with the possibility of either a quick recovery or a deepening slump.