Solana Price Recovery: What’s Next for SOL as It Breaks Out Against Ethereum?

Solana Price Recovery: What’s Next for SOL as It Breaks Out Against Ethereum?

Solana price has recently rebounded, with the broader cryptocurrency market seeing a 4.5% increase in the last 24 hours. SOL briefly crossed the $150 mark before retracing to its current price of $149. Notably, Solana has also broken out against Ethereum, a development often viewed as a sign of future outperformance. This surge comes despite ongoing criticisms accusing Solana of centralization. So, what lies ahead for SOL?

Why is Solana Outperforming Ethereum?

Over the past year, SOL has consistently outpaced Ethereum in terms of price performance. SOL is up 4.29%, while Ethereum has dropped 18.46% over the same period. Several factors contribute to Solana’s stronger performance. One key driver is the rise of meme coins on SOL, boosted by platforms like Pump.fun. Additionally, SOL’s low transaction fees and high-speed network, even during periods of heavy usage, have bolstered its appeal.

Meanwhile, Ethereum has faced headwinds that have indirectly fueled SOL’s ascent. Negative net flows in Ethereum’s U.S. spot ETF and persistent issues with high fees and slower network speeds have diminished confidence in the Ethereum network. As a result, investors increasingly view Solana as a more attractive alternative.

Data from DeFiLlama underscores this shift. Ethereum’s share of total value locked (TVL) has dropped from 62.38% to 54.94% since July 23, 2024, when the Ethereum spot ETF began trading. During the same period, Solana’s TVL share rose from 4.14% to 6.56%. The downturn in Ethereum’s ETF performance has driven investors to seek value in Solana, further boosting its price. Since June 20, Solana has gained 6.39%, while Ethereum has declined by 30.13%.

Additionally, Ethereum has faced criticism from figures like Justin Bons, CIO of Cyber Capital, who argues that Ethereum’s Layer 2 solutions are draining liquidity from the Layer 1 mainnet, creating further challenges for the network.

SOL Price Analysis: Is $180 on the Horizon?

SOL price action is forming an inverse head-and-shoulders pattern, a classic bullish reversal indicator. The price is approaching the neckline around $160, and a breakout above this level could confirm the reversal, potentially pushing SOL to higher targets. If the breakout succeeds, the next resistance level is expected around $180, with longer-term resistance projected near $200 based on the height of the pattern.

Moreover, SOL’s breakout against Ethereum suggests further gains, with the potential for SOL to increase by as much as 18% relative to its rival. This could trigger a shift in investor sentiment, driving more capital from Ethereum to Solana, further increasing its price and TVL.

However, if SOL fails to break above the $160 neckline, it may signal market weakness. In this scenario, the price could retrace to $148, a key support level. Further downside pressure could push the price lower to $140, representing a recent two-month low. Should selling persist, the longer-term support lies at $110.