• Solana drops nearly 2% on Thursday, approaching a crucial support level tested last week.
• Derivatives data indicates capital outflows and bearish sentiment among traders.
• The technical outlook for Solana indicates a downside bias, as bearish momentum persists.

Solana (SOL) is trading in the red, down 2% at press time on Thursday, aligning with the broader cryptocurrency market correction as the US Federal Reserve (Fed) kept the interest rates unchanged on Wednesday. The smart contract token shows a rising bearish bias in retail sentiment as SOL futures Open Interest declines and funding rate turns negative. Technically, Solana flashes downside risk targeting the $116 support zone with a deeper zone at $100.

Declining retail sentiment and potential recovery catalysts

Solana is losing retail strength as capital outflows from its derivatives market reinforce risk-averse sentiment. CoinGlass data shows that SOL futures Open Interest fell 1.40% over the last 24 hours to $7.42 billion, indicating a significant positional wipeout or leverage reduction. 

Confirming the bearish bias, long liquidations of $5.55 million outpace short liquidations of $1.34 million over the last 24 hours, indicating that broadly bullish positions were wiped out. Additionally, the funding rate has flipped negative to -0.0042%, reflecting a short position among new players.

The subdued retail interest in Solana aligns with a broader pullback following the US Fed's decision to keep interest rates unchanged at 3.50%-3.75% on a 10-2 vote. The two votes in favor of rate cuts and the rest approaching a wait-and-see approach imply an end to the quantitative tightening phase. Potential rate cuts later in the year could boost liquidity in the cryptocurrency market, fueling a recovery.

Additionally, the upcoming rescheduled meeting between the US government, banks, and cryptocurrency market leaders to discuss crypto market structure would be a potential bullish catalyst if the CLARITY bill is passed.

Technical outlook: Will Solana price hold above $116?

Solana remains below the 50-, 100-, and 200-day Exponential Moving Averages (EMAs), underscoring a bearish bias. At the time of writing, SOL is down 2% on Thursday, extending the over 1% decline from the previous day.

Immediate support for Solana is at $116, which previously limited downside moves on Sunday and December 18. 

The Moving Average Convergence Divergence (MACD) trends below the signal line, while a contracting negative histogram suggests easing downside momentum. The Relative Strength Index (RSI) at 40 reverses from near the midline, indicating a weak tone, with further downside before oversold conditions are reached. 

If SOL closes decisively below $116, it would open the door to the $100 psychological level and the $95 support level, aligning with the April 7 low. 

On the upside, Solana faces multiple levels of resistance at the 50-day EMA at $133, followed by the 100-day EMA at $144, near the $145-$148 supply zone.

(The technical analysis of this story was written with the help of an AI tool.)