Can Solana lose the narrative battle?

Not much has occurred overnight and key levels across Bitcoin and Ethereum remain unchanged. This will allow us to take a look at Solana and see what can be in store for this alt L1

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Textbook head and shoulders

Solana appears to be forming the right shoulder of a classical technical analysis setup called the head and shoulder. As quoted by Investopedia, “A head and shoulders pattern is a chart formation that appears as a baseline with three peaks, where the outside two are close in height and the middle is highest. In technical analysis, a head and shoulders pattern describes a specific chart formation that predicts a bullish-to-bearish trend reversal”.

For the technical setup to be complete, it will need to break the neckline which is currently sitting at the $30 USD level, should this occur we can anticipate a quick move to the downside and eventually trading sub $10.
For this pattern to be invalidated we would need the market to form a new high in the mid $50 range for new setups to be explored.

With the high timeframe technicals established, let’s wade into the murkier waters of sentiment analysis, it’s hard to say if the narrative war of alt L1s has been definitively lost but it will take major confluence of bullish catalysts to revive it and with the Ethereum Merge fast approaching, almost all liquidity and attention within the crypto space is focused on ETH.

If the merge is to be successful within Sept/Oct 22 and Ethereum navigates the potential hard forks, it will be hard to see a spot for Solana to break through and command the attention it once had in mid to late 2021.

Of course within the crypto space, attention and momentum is fickle, so this outlook can change quite quickly but we would like to hear your thoughts as well.

Bitcoin resistance out in full force

BTC has now tested the 25k handle on the hourly chart 4 times and each time has been faced with a resounding rejection trading, we are now trading at 24k down 4% from the attempt at taking out 25k.
It’s quite simple, if we close above 25k with some strength then all the momentum is to the upside, the downside is likely to be tested by some outside catalyst, there aren’t many known risks upcoming such as important macro data but as a Bitcoin bull, one of the more painful scenarios is continued false breakouts and sideways price action.

Yield curve inversion deepens

The US 10Y yield and US 2Y yield is now deeply inverted and has a gargantuan 40 bps spread. The macro bears have been caught on the wrong side of the relief rally that has occurred to start the second half of the year but with headline inflation out of the US still at astonishingly high levels, with the rest of the developed world experiencing the same phenomena, and with short term yields paying a much larger premium, it all shows the bond market having massive concerns in the near term.
The likelihood of a soft landing is now very hard to envisage, when the debt market shows sign of distress, risk asset investors would be wise to take a step back from the excitement inducing green candles and assess their portfolio.

It’s important to note that this isn’t to be alarmist but instead just filter out the noise created from this relief rally, so that we can rationally assess our next move.

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