KEY TAKEAWAYS

• Solayer (LAYER) fell nearly 40% in several hours on May 6.

• Solayer will unlock nearly 13% of its circulating supply on May 11.

• Can LAYER regain its footing, or will it continue falling in May?

Solayer debuted on Feb. 11 and immediately began its ascent, continually reaching new all-time highs in April and May.

At one point, LAYER paced the crypto market in monthly and weekly increases. However, this all changed on May 6, when a 35% decline in just a few hours caused widespread panic.

After stabilizing the next day, LAYER resumed its downward trend and is close to another breakdown.

Let’s examine the reasons behind this decline and determine where the price will head next.

LAYER Price Crashes

The LAYER price has fallen 60% in the four days since its all-time high of $3.41 on May 5.

While most of the decline occurred on May 6, the price did not manage to bounce and also fell the next day.

During the decline, LAYER broke down from an ascending parallel channel, negating the possibility that it is still trading in a bullish structure.

Today, the LAYER price trades inside the $1.25 horizontal support, a critical level since launch.

If LAYER breaks down, it could fall another 50% and reach the $0.65 support area, the final one before a new all-time low.

Alternatively, the area could initiate a bounce (green) and take LAYER to the parallel channel, confirming it as resistance.

However, the decrease has confirmed that the trend is bearish and new lows are eventually likely.

The Relative Strength Index (RSI) affirms this since it fell after generating a bearish divergence (orange) and decreased below 50 for the first time.

*The remainder of this article was originally published on May 6. The above analysis provides an updated look at LAYER’s price movement since then.

Layer Token Unlock

Community members are shocked at the price decline, but Onchainquant noted that a large whale exited during the Asia session five days before the unlock.

The user built a massive short via perpetual futures, causing the funding rate to go negative.

Then, he slowly started to unwind his long position, profiting heavily from the short position and offsetting the losses from the funding rate.

The price decline occurred five days before unlocking over 27 million tokens, nearly 13% of the supply.

This is a cliff unlock that will primarily benefit the foundation. It will also trigger a linear vesting schedule, with 9,375 million tokens released to the foundation every three months until 2030, significantly increasing token inflation.

Why Did LAYER Plunge?

The LAYER price has increased rapidly since April 9, when it broke out of an ascending parallel channel. 

Solayer’s increase led to a new all-time high price of $3.41 on May 5. As predicted last week, the LAYER price crashed after the high.

As long as the price trades inside the channel, it allows for a fourth-wave pullback and a new high.

Moreover, technical indicators are bearish. The Relative Strength Index (RSI) and Moving Average Convergence/Divergence (MACD) are falling.

The former generated a bearish divergence and is below 50, while the latter made a bearish cross (black circle).

So, the daily time frame makes it unclear whether LAYER will fall to new lows. Whether the price breaks down from its ascending parallel channel or bounces is key to what will happen.

Token Unlock Causes Crash

LAYER’s token unlock and increasing emission may have played a part in a whale exiting its significant position.

While the LAYER price is technically still in wave four, the shape of the decline and the negative news cast doubt on whether the rally can continue.

A breakdown from the ascending parallel channel could cause LAYER to crash to new lows.