- Solana’s sharp decline in Q1 has raised concerns about the asset’s future direction.
- Without a clear catalyst for recovery, further downside could be on the table.
Solana [SOL] kicked off 2025 with a tough Q1, dropping 34% and losing $100B in market cap, wiping out all the gains from the pre-election hype.
Now, back to its September 2024 low, will Q2 be any different, or is the risk of high-stakes sell-offs still too strong?
Risk of capitulation grows as FOMO fades
Solana, like many high-cap assets, has struggled due to a combination of macro and microeconomic factors. However, its Q1 downturn stands out as one of the most severe among major assets.
From a technical perspective, Solana’s 1D price chart lacks clear support levels. Without strong bullish demand at key levels, the asset faces a high risk of further declines, especially if HODLing sentiment weakens.
At the time of writing, Solana’s has reached a two-year high, with only 32% of the supply in profit. This imbalance increases the likelihood of a sell-off, as underwater holders may be more inclined to capitulate.
The Net Unrealized Profit and Loss (NUPL) metric indicates that Short-Term Holders (STH) have entered a capitulation phase. This could trigger a wave of sell-offs.
If the broader market fails to recover soon, Solana’s network may experience significant liquidity outflows.
Source: Glassnode
Historically, Solana has only found a local bottom when it enters the hope/fear phase, where FOMO kicks in and market confidence returns. Without this shift, sell-side pressure could continue, and the risk of further declines remains.
Adding to the bearish outlook, the SOL/BTC pair has erased its mid-March gains, with a sharp weekly decline.
At press time, the MACD was on the verge of flipping bearish, signaling that SOL could soon test its $115 support.
Can Solana turn it around in Q2?
Solana started Q1 strong, with new addresses surging to 8 million by mid-January, but momentum has sharply declined, and the count has dropped to a six-month low of just 312k.
Source: Glassnode
Earlier in the quarter, Solana saw impressive spikes in staking and DEX volume, signaling healthy investor engagement. However, both metrics have since fallen significantly, dropping well below their pre-election highs.
With rising capitulation fears and a lack of spot accumulation, Solana is at risk of losing the $115 support.
Unless there’s a shift in sentiment or a catalyst to spark demand, expecting a bullish Q2 seems increasingly too far- fetched.
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