Why could SOL further decrease?

• The price of Solana is closing below the 200-day EMA support at $196 after falling more than 13% this week.
• This recent decline resulted in $38 million in total liquidations, with more than $33 million from long positions.
• Traders should remain cautious as SOL’s TVL has fallen by more than 7% in one day.

The price of Solana (SOL) is trading in the red below $194 on Friday after falling more than 13% this week. The recent decline led to $38 million in total liquidations, with more than $33 million from long positions. Traders should remain cautious as SOL’s Total Value Locked (TVL) fell more than 7% in one day, hinting at a double-digit correction to come.

Solana price is set to decline as it closes below the $196 support level

Solana price faced resistance around the $230 level on Tuesday. SOL fell 13% over the next two days, closing below the daily support level of $201.85 and the 100-day exponential moving average (EMA) at $196 on Thursday. At the time of writing on Friday, it is trading below the 100-day EMA around $194.

If the $201.85 level holds as resistance, SOl will extend the decline by 10% to retest its next support at $174.85, the 200-day EMA.

The Relative Strength Index (RSI) indicator on the daily chart is at 35, below its neutral level of 50 and pointing down, indicating strong bearish momentum.

Daily chart of SOL/USDT

The recent drop in prices on Thursday triggered a wave of liquidation, removing the position of leveraged traders throughout the SOL ecosystem. This drop resulted in more than $38.86 million in total liquidations, with $33.57 million coming from long positions, according to CoinGlass data.

Liquidations like this could cause fear, uncertainty and doubt (FUD) among SOL investors, increasing selling pressure and driving its price down further.

Chart of total liquidations of SOL. Source: Coinglass

Another factor adding to the bearish outlook for Solance is the sharp drop in total locked-in value (TVL). According to data from DefiLlama, SOL TVL fell from $11.22 billion to $10.35 billion, a drop of more than 7% in one day. A similar drop in TVL was recorded on August 3 and October 29, after which prices fell by more than 10% in a few days. If history repeats itself, SOL could face a similar drop in price.

SOL TVL chart. Source: DefiLlama

Although on-chain metrics and technical analysis support the bearish outlook, the thesis would be invalidated if SOl price recovers and closes above the $201.8 resistance level. This recovery would see the price rise to retest its next resistance level at $230.