Solana’s Bearish Divergence Shows SOL Traders Will Dump in October

Solana (SOL) is signaling a potential correction ahead as traders approach October.

Bearish Divergence, Rising Wedge Indicate Solana Selloff Ahead

A clear bearish divergence between SOL’s rising price and its falling Relative Strength Index (RSI) suggests that bullish momentum is weakening, making the token vulnerable to a short-term pullback.

Notably, SOL’s price has surged over 25% from its mid-September low of $126 to its recent peak of $159. However, despite this price growth, the RSI has declined from 74.56 on September 23 to 64.42 on September 27, forming a bearish divergence that typically precedes a trend reversal.

A rising wedge setup, defined by two upward-sloping and converging trendlines, also indicates a potential SOL price correction. For the unversed, rising wedges resolve when the price breaks below the lower trendline and falls by as much as the maximum distance between its upper and lower trendlines.

So, a decisive, high-volume breakdown below the wedge’s lower trendline may send SOL’s price toward the $140-142 range. Interestingly, this area coincides with the 200-4H exponential moving average (EMA) and the 0.382 Fibonacci retracement level.

In other words, SOL may decline by 9-11% in early October. Conversely, a bounce from the lower trendline may send its price toward the wedge’s apex point at around $165.

Solana’s Long-Term Outlook Remains Bullish

Despite the looming short-term risks, the long-term outlook for SOL remains bullish.

According to the latest VanEck report, Solana could capture a significant portion of Ethereum’s (ETH) market share due to its higher throughput and lower transaction costs, particularly in decentralized finance (DeFi) and non-fungible tokens (NFTs).

The report argues that Solana’s blockchain, which can process up to 65,000 transactions per second (TPS), gives it a competitive edge over Ethereum. Despite its shift to proof-of-stake, Ethereum is struggling with high gas fees and scalability issues.

VanEck projects Solana’s price to rise to $330 in the coming years. For context, this price target represents an approximate 111% increase from Solana’s current levels.

Macro Factors Support Long-Term Bullish Bias

Additionally, the macroeconomic environment continues to favor long-term bullish momentum for SOL. Central banks, including the US Federal Reserve, European Central Bank (ECB), and People’s Bank of China (PBoC), are shifting toward looser monetary policies.

Historically, low interest rates and increased liquidity have bolstered demand for risk assets like cryptocurrencies.

For example, in the wake of the COVID-19 pandemic, loose monetary policies contributed to the crypto market’s explosive growth in 2020 and 2021, when Bitcoin rallied from under $4,000 to an all-time high of $69,000, and Solana surged from $0.50 to $260 at its peak.