The active addresses on Solana have dropped while the retail sentiment is rising drastically. This divergence comes as the price of Solana is approaching a local resistance level for the eighth time.
SOL transfers fall to just under 3 million per week from 5 million
Sentiments, an on-chain analytical tool, spotted a major divergence occurring with Solana metrics. The active addresses or the wallets transferring Solana tokens have seen a drastic drop. From recording a high value of 5 million in early February, the wallet activity, or transfers, has fallen to just 2.89 million in the most recent week.
The active addresses signify the number of unique wallets using the network, indicating that this is the result of fewer users conducting activities, trading, or using any application on the blockchain. This is practically the indicator of low participation, which is usually brought about by lower speculation, hype cycles involving meme tokens or NFTs, or market consolidation.
SOL’s short-term engagement weakness is not long-term bearish trend
This is indicative of low engagement in the short term, particularly since the high engagement was experienced during the past period; however, it is important to note that this does not mean that there is a long-term bearish trend.
However, the sentiment toward Solana has skyrocketed to its highest level since January. The current narrative on X, Reddit, and Telegram is that Solana is now destined for a breakout after Bitcoin and other large-cap cryptocurrencies. The narrative is so strong that there are about ~3.2 bullish comments for every 1 bearish comment across social media platforms.
Bullish narrative pairs with declining addresses
The combination is quite interesting: a bullish breakout narrative and declining active addresses on Solana. This shows a divergence between market sentiment and actual on-chain activity.
On the one hand, the traders and the market at large may demonstrate expectations for a bullish breakout due to positive momentum. On the other hand, the declining number of active addresses means that fewer people are using the cryptocurrency.
This combination often implies that speculation and narrative, rather than strong underlying demand from users, lead the rally. While this can still result in a short-term price breakout, it is not fully confirmed by network fundamentals, and the move may either strengthen later if activity picks up or lose momentum if user engagement continues to decline.
Solana is once again testing the $88 resistance level for the eighth time within the last couple of months. During these days, the coin tested the resistance, sometimes broke above, and at other times was rejected at this level. Every single time it broke above this level, it could not keep the prices up there.
So when the whole context of how the traders behaved is put into a picture, Solana price action takes the form of a symmetrical triangle. A symmetrical triangle is a chart pattern that forms when price moves within a narrowing range, creating lower highs and higher lows over time.
SOL market is balanced but will lean more towards the bulls
This structure reflects a state of balance between buyers and sellers, where neither side has enough strength to push the market in a clear direction. In addition, the range narrows, volatility drops, and the price becomes even more compressed. The market starts getting pressured in this stage of the pattern. The period in question is usually referred to as consolidation, but in reality, consolidation precedes a breakout.
Eventually, the breakout will occur in one direction or the other based on which direction regains control. The breakout would come along with a pick-up in volume and momentum.
Currently priced at $86, Solana is headed back toward its resistance level of $88. There would be increased buying and selling around the $88 area since SOL could breakout from here.
As SOL forms its triangle formation and moves closer to its apex, there will be some price action in the triangle. Ultimately, if SOL breaks out from here, it would move higher, exceeding $90.