Key Takeaways
Solana and Avalanche have each dropped over 30% in the last 72 hours.
Both Layer 1 tokens are now testing crucial support areas and their futures look uncertain.
In the meantime, investors continue exiting the markets amid an overall decline in the crypto market.
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Solana and Avalanche seem to have reached a crucial demand wall after seeing their market value drop by more than 50% over the past few weeks. Still, the lack of buyers at current price levels is a warning signal.
Solana and Avalanche at Weak Support
Layer 1 tokens SOL and AVAX have crumbled as fear and despair echo across the cryptocurrency market.
Solana has plummeted by more than 36% over the past three days, going from a high of $75 to hitting a low of $48 recently. The steep correction pushed SOL to test the lower boundary of a parallel channel at $51.60, where it has been contained since September 2021.
Such a vital demand zone would have to hold to prevent the Layer 1 token from incurring further losses.
The measurement of the channel’s width suggests that a decisive weekly close below the $51.60 support level could trigger a 50% correction. Under such unique circumstances, Solana could crumble under selling pressure toward $26 or lower.
The eighth-largest cryptocurrency by market cap must hold above the channel’s lower trendline at $51.60 for a chance of recovering some of the recent losses. Price history shows that each time SOL has rebounded from this support level, it has tagged the channel’s middle or upper boundary. Similar price action might result in an upswing to $70 or even $95.
Source: TradingView
Avalanche also took a significant nosedive over the past three days. The Layer 1 token crashed by nearly 50% after losing its $51.60 support level. The steep downtrend appears to be part of a bearish breakout from a head-and-shoulders pattern that developed on AVAX’s weekly chart.
Now that Avalanche has reached the $28 target presented by this bearish technical formation, it remains to be seen whether it can gain the strength to rebound.
The precarious market conditions suggest that lower lows can be expected. But for that to happen, AVAX would have to print a weekly candlestick close below $27. Breaching this vital demand zone could encourage further selling among market participants, resulting in a downswing to $17 or even $10.
Source: TradingView
On the other hand, bulls would have to bring Avalanche above $37 and defend this level to invalidate the pessimistic outlook. Accomplishing such a difficult task could encourage sidelined investors to reenter the market, pushing AVAX to $51.
Disclosure: At the time of writing, the author of this piece owned BTC and ETH.
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