Will Solana Price Outperform Ethereum Further in 2024?

In 2024, Solana (SOL) has outpaced Ethereum’s native token, Ether (ETH), in several key metrics, including price performances and network growth.

For instance, in July, Solana surpassed Ethereum in weekly transaction fees for the first time, generating $25 million in a single week compared to Ethereum’s $21 million. This milestone underscored the increasing adoption of Solana’s network, particularly in areas like memecoin trading, which has seen explosive growth on platforms such as Pump.fun​.

Looking at price performance against the U.S. dollar, Solana’s rate has soared 45% year-to-date versus Ether’s 16.30% gains, according to data tracked as of Aug. 26. That has led to remarkable growth in the widely traded SOL/ETH pair, which is up by over 30% in the same period.

However, fresh signals indicate Solana’s potential upside exhaustion against Ether in September and the months afterward.

SOL Risks Wiping Its 2024 Gains Versus ETH

At least two technical factors suggest a potential price correction in the SOL/ETH pair ahead.

First, as of Aug. 26, Solana was trading closer to the upper trendline of its prevailing ascending channel pattern, which has historically preceded sharp corrections toward the channel’s lower trendline.

In other words, a pullback from the upper trendline—if accompanying a rise in trading volumes—risks crashing SOL/ETH toward 0.041 ETH, thus wiping out its 2024 gains entirely.

The 0.041 ETH level coincides with the channel’s lower trendline and has served as a support line during the April-June 2024 session. It is also near SOL/ETH’s 50-day exponential moving average (50-day EMA; the red wave), which limited the pair’s downside attempts in June 2024.

Further suggesting a downside in the SOL/ETH pair is a clear deviation between its uptrend and its falling momentum. In other words, SOL/ETH has been forming higher highs while its daily relative strength index (RSI) is forming lower highs.

From a trader’s perspective, the observed “bearish divergence” is a classic warning signal of potential weakness in the current SOL/ETH uptrend. They might take the divergence as a cue to either lock in profits or prepare for a potential short position, anticipating a pullback or reversal in the SOL/ETH pair.

Ethereum’s Market Dominance is Reaching a Bullish Inflection Point

The bearish SOL/ETH outlook arrives at a time when Ethereum’s share looks prepared to grow against the broader crypto market.

Ethereum Dominance Index (ETH.D), a metric that tracks Ether’s market capitalization performance against the rest of the crypto market, is at its lowest level in two years. Interestingly, the same range preceded a 40% growth in Ether’s market share in 2022, as shown below.

In addition, the ETH.D’s weekly RSI is around 35, just five points above its oversold threshold of 30. This reading indicates a heightened selling momentum in Ethereum compared to the rest of the crypto market.

Traders often view an RSI in this range as a cautionary signal, as it implies that the current downtrend could continue but also that the asset might be nearing a point of potential reversal if it becomes oversold.

As a result of these technical signals, ETH.D may undergo a sharp recovery toward its descending trendline resistance at around 18.29% from the current 15% level.

Ethereum’s metrics contrast with the Solana Dominance Index (SOL.D), treading near levels that have historically preceded drops in SOL’s market share versus the rest of the crypto market.

A correction from local highs risks sending SOL.D toward its ascending trendline support at 1.51%, coinciding with the 200-week exponential moving average (200-week EMA; the blue wave). A bearish divergence between a flatlining SOL.D and a falling RSI furthers the bearish outlook.

Overall, these signals indicate Solana will likely lose its market share versus Ethereum and the broader crypto market. On the other hand, Ether’s market dominance may boom due to its relatively discounted value compared to the crypto market and its top rival, Solana.