Solana Faces Death Cross Risk as Disinflation Proposal Goes Live

TLDR

• Solana’s disinflation proposal could reduce 22.3M SOL over six years if passed.
• Price risks falling below $123 amid a 47% drop from the recent local top.
• Death Cross formation could lead to a further decline toward the $100 level.
• Realized profit/loss ratio hits its lowest since June 2023, hinting at market stress.

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Solana (SOL) is under pressure as its price nears the key $123 support level, while a new proposal aims to accelerate token supply reduction. The live proposal, SIMD-0411, suggests doubling the disinflation rate from -15% to -30%, potentially reducing SOL supply growth by 22.3 million tokens over six years. Meanwhile, technical signals indicate a possible Death Cross, increasing bearish sentiment. However, realized losses have hit multi-year lows, which previously signaled market reversals, offering a possible short-term recovery path.

Solana Price Faces Key Test Amid Bearish Technical Pressure

Solana is experiencing intensified selling pressure, bringing its price near the $123 support level not tested in months. SOL is currently trading at around $127, reflecting a 47% decline from its recent local high.

Technical indicators suggest a possible Death Cross pattern may soon form. This occurs when the short-term EMA moves below the long-term EMA, often signaling prolonged downward momentum. During past occurrences, such setups have preceded price drops of more than 50%.

If this pattern plays out, analysts say SOL could fall toward $100 or even $98. Solana’s price fell by more than 30% in the past month, reflecting weakness in both project sentiment and broader market conditions.

Realized Losses Hit Multi-Year Lows but May Signal Reversal

Solana’s net realized profit/loss ratio has dropped to its lowest level since June 2023, according to Glassnode data. This metric gauges the average profitability of investors based on their most recent asset movements.

When the ratio falls below 0.1, historical data shows it can mark a point of market saturation. In 2023, similar lows in March, April, and September were followed by recoveries, suggesting that the current situation could also precede a rebound.

However, sentiment remains fragile, and market direction depends on whether realized losses stabilize. A bounce from the $123 support could see the price move toward $136 and later $157, if buyers return.

Proposal Aims to Accelerate SOL’s Supply Reduction

A new proposal known as SIMD-0411 is now live for community review. It suggests doubling Solana’s disinflation rate from -15% to -30%. This change would cut the time required to reach the long-term supply target from six years to just three.

Mert Mumtaz, co-founder of Helius, confirmed on X that the proposal is under active review. “The proposal does not impact staking rewards but shortens the disinflation timeline,” Mumtaz stated.

If implemented, Solana’s total token supply growth could drop by approximately 3.2% over six years. That would reduce the supply by nearly 22.3 million SOL tokens during that time.

Staking Yields Expected to Gradually Adjust Over Time

Although the disinflation rate may change, staking rewards will remain consistent under the proposal. Current yields are near 6.41% and could reach about 2.42% over three years, assuming 67% of the supply remains staked.

This gradual change aims to maintain balance within the ecosystem while adjusting the long-term issuance model. The proposal still requires community and validator approval before it takes effect.

The live status of SIMD-0411 introduces a new factor for traders and long-term holders to consider, especially during a period of market uncertainty and price volatility.

ETF Activity and Broader Market Sentiment

Interest in SOL-related investment products is growing. Firms including Bitwise, Fidelity, Grayscale, and VanEck have launched Solana ETFs. 21Shares launched its TSOL ETF on the CBOE on November 19, increasing institutional exposure.

Despite this, Solana remains tied to overall crypto market conditions. Whether the disinflation proposal can shift sentiment will depend on both adoption and short-term price stability above key support levels.

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