In a technical analysis, renowned cryptocurrency analyst Gert van Lagen presented an extremely bearish outlook for Solana (SOL), suggesting that its price is poised for a significant downward move. The basis of Van Lagen’s analysis is the widely recognized Elliott wave theory – a methodology that aims to identify recurring patterns and cycles in market price movements.

Why the price of Solana may fall

In the heart of Van Lagen analysis lies an analysis of Solana’s pricing action over the past few years. In his assessment, 2021 was the culmination of a pure Elliott Wave for Solana, signaling the end of the bullish cycle. This uptrend is characterized by a specific pattern of five waves, with the last wave being the climax before the reversal.

As we enter 2022, Van Lagen’s analysis points to the development of a downward wave, which he classifies as the first stage of a prolonged bear market. Most importantly, the A-wave decline shows a clear five-subwave pattern, which is consistent with the principles of Elliott wave theory. The presence of these subwaves is a key indicator of the likelihood of the downtrend continuing as they are believed to reflect underlying market sentiment and psychology.

In 2023, Van Lagen observed the formation of a B wave, an upward correction within the broader context of a bear market. Like wave A, wave B consists of five sub-waves, following the Elliott wave pattern of corrective movements. Identifying this B wave is crucial because it suggests that the overall downtrend has not yet been fully exhausted and that further downward momentum may be on the way.

As the analysis shifts to 2024, Van Lagen expects Wave C to materialize. In the Elliott wave model, wave C is the last stage of a broader bear market cycle, and its occurrence would potentially mean an end to the ongoing downtrend for Solana.

Notably, Van Lagen’s analysis also highlights the presence of a bearish divergence in the weekly Relative Strength Index (RSI), a commonly used momentum oscillator. A bearish divergence occurs when price makes higher highs while the RSI fails to confirm these highs, potentially signaling an upcoming trend reversal or loss of bullish momentum.

Van Lagen wrote via X: “I’m running out of SOL –> I’m ready for the next step down. 2021: Elliottwave clean install completed; 2022: Wave A down extended bear market <- 5 sub-waves; 2023: Wave B of prolonged bear market <- 3 sub-waves; 2024: Expectation is wave C decline. Bearish divergence on weekly RSI.”

It is worth noting that the analyst refrains from specifying an exact target price. However, the blue arrow on the chart suggests that van Lagen predicts that SOL’s price could drop to around $13. Such a decline would mean a dramatic drop in prices of over 90% from current price levels.

50% chance this will happen

In his commentary, Van Lagen acknowledged the risk of his compact position on Solana, characterizing it as a “50/50 trade” and “cheeky.” However, he defended his decision, saying it was supported by a “good theoretical framework” and served as a hedge against his long positions in other assets. The analyst emphasized the importance of analyzing an isolated chart without emotion, emphasizing the need for objectivity in technical analysis.

“Shorting SOL is a 50/50 trade, go ahead, but also a hedge against my long positions. Looking at an isolated chart without emotion, there is a good reason for this. It’s a risky deal and I realize it. But also supported by a good theoretical framework,” he said he stated.

While Van Lagen’s analysis presents a bearish outlook for Solana based on Elliott Wave theory, it is vital to remember that the broader cryptocurrency market often moves in lockstep with Bitcoin. This relationship raises questions among other market participants. One user summed up this sentiment by commenting: “This is really weird. Do you think BTC will rise in the coming weeks but SOL will fall? We are still in a market structure where the big coins are not falling as much while Bitcoin is rising.”

At press time, SOL was trading at $165.

Featured image created with DALL·E, chart from TradingView.com