Solana is having a moment
Solana revisited $200 for the first time in over two years. [BT Series via Getty Images]
There’s never a dull moment on the blockchain. Here’s what you need to know this week:
Crypto markets pulled back to start the week. Despite the correction, traders are still sending bullish signals.
Solana hit its highest price level since 2021. The Ethereum alternative has seen a flurry of onchain activity and newly popular tokens.
This week in numbers. The average trade size for BlackRock’s BTC ETF, the amount of registered crypto investors in Indonesia, and more stats to know.
MARKET UPDATE
Crypto markets start the week red, but traders are still optimistic
After a three-week rally that saw bitcoin hit fresh all-time highs and a variety of altcoins run up sizable gains, crypto markets started this week by taking a breather.
Bitcoin was down as much as 18% from last week’s highs near $74,000. Ethereum tumbled approximately 25% in the same span, and altcoins including Dogecoin, Algorand, and Filecoin all saw similar losses.
Despite this week’s correction, prices remain historically high, retail and institutional investors keep sending bullish signals, BTC ETF inflows continue to set records, and some analysts expect a wave of new crypto adopters to arrive in the coming months.
Here’s what you need to know.
Why were prices down this week?
Declines of 15% or higher after new all-time highs are typical for BTC, as markets adjust downward after traders sell for a profit. Similar pullbacks also took place after new highs both in 2017 and 2021, before BTC ultimately continued its climb.
Inflation data released last week also has some market watchers worried that the Federal Reserve might not be able to reduce interest rates as quickly as expected. (Lower rates are historically correlated with higher crypto prices.)
“Investors now bet that central bankers will cut rates three times by the end of the year, to about 4.6 percent,” reports the New York Times. “Just a month ago, they expected four cuts, and saw a reasonable chance of five.” And some are even less optimistic. Vanguard’s global chief economist said there’s a “growing probability” that rate cuts won’t start until 2025.
Bitcoin ETFs attracted a record-breaking $2.5 billion last week.
The latest inflows — which marked the second straight week of $2 billion-plus in inflows — eclipsed the previous high-water mark of $2.3 billion from mid-February.
Out of thousands of ETFs that trade in the U.S., BlackRock’s and Fidelity’s spot BTC products both rank in the top five for year-to-date inflows.
As a group, the ten spot BTC ETFs notched more than $28 billion in trading volume last week. According to Matteo Greco, analyst for Fineqia International, these stats “underscore the sustained momentum of investments from traditional finance into the digital assets space.”
Investment advisors could lead the next wave of demand for bitcoin.
Professional investment advisers have long wanted an easy way for their clients to access bitcoin, according to polls — which they now have in the form of the spot BTC ETFs.
Typically, investment advisory firms wait three months before recommending new ETFs to their clients, but some major firms are already offering the new funds.
The Carson Group, which manages $30 billion in assets, is allowing advisers to start offering the spot ETFs to clients — with some advisers expected to recommend a 3.5% average portfolio allocation. Cetera Financial Group, which has $190 billion under management, has reportedly approved four of the BTC ETFs for advisors to implement in client portfolios.
In the coming months, a wave of other firms is expected to follow suit, according to CoinShares Head of Research James Butterfill.
“Given that the [registered investor advisory, or RIA] market represents about $50 trillion in assets, the potential inflows could be significant,” Butterfill told the Block. “For instance, if 10% of RIAs chose to invest 1% of their portfolios, this could result in approximately $50 billion in additional inflows.”
Could spot ether ETFs help ETH reach new highs?
In a note to investors this week, British banking giant Standard Chartered predicted that ether could hit $8,000 by the end of 2024 and rise as high as $14,000 by 2025, boosted by the arrival of spot ETFs like the ones that have powered the BTC market this year.
While Bloomberg analysts have assigned a 30% chance that spot ETH ETFs will gain SEC approval in the near term, Standard Chartered predicts that the ETFs will be approved by the May 23 deadline, helped by the London Stock Exchange’s announcement that it will accept applications for BTC and ETH investment products in Q2 of this year.
Ahead of potential Ethereum spot ETFs, institutional giants also appear more willing to deploy capital onto the blockchain, with BlackRock seeding a tokenized private equity fund with $100 million of USDC, according to recent SEC filings.
Ethereum’s momentum also got a boost from last week’s “Dencun” network upgrade, which significantly cut transaction costs for Layer 2 blockchains that run on top of the main Ethereum blockchain.
Post-upgrade, Layer 2 blockchains like Base (which was incubated by Coinbase) have seen a significant rise in transaction volume. Crucially, fees on Ethereum Layer 2 chains are now at times lower than fees on competing Layer 1 chains like Solana.
The bottom line…
It’s natural for traders to take profits when prices reach never-before-seen highs. But what might happen in the longer term? In another note, Standard Chartered offered a deeply bullish take: BTC could hit $150,000 by the end of 2024 and $250,000 next year as traders continue to pile into ETFs.
SOL CYCLE
Solana’s price climbed back above $200 as trade volumes surged
At this time last year, the future didn’t look especially bright for Solana, one of several low-fee, smart-contract-compatible blockchains designed to compete with Ethereum. Prices were a tiny fraction of 2021 peaks, and a huge amount of SOL’s market cap was tied up in FTX’s bankruptcy.
But now that the broader crypto market has come roaring back, Solana is one of the breakout stories of this cycle. Prices are up more than 700% for the last 12 months, with SOL climbing back above $200 on Monday for the first time in more than two years. (Alongside the broader market, SOL dipped on Tuesday, falling below $180.)
One major factor boosting prices? Around $11 billion in transactions on the Solana blockchain in just 24 hours on Monday, powered by a slew of smaller and newly popular tokens. Let’s dig in.
The network keeps breaking records.
In the last week, Solana’s market cap hit a new all-time high, boosted by the combination of rising prices and an increased number of tokens circulating now compared to the last bull cycle.
And as onchain volumes have soared, the amount of fees the network has collected has risen to new heights. As Coindesk reports, “The network amassed $3.2 million in fees over a [recent] 24-hour period, beating a $300,000 record from 2021. Onchain volumes climbed over $3 billion, flipping a November 2022 record of $300 million.”
Solana’s user activity surpassed Ethereum’s.
Much of Solana’s recent activity has taken place on decentralized exchanges (DEXs) like Jupiter and Raydium — with traders accumulating cheap, buzzy “memecoins” like Bonk.
DEXs are applications that run on the blockchain and allow traders to make transactions that are powered entirely by code, with no human intermediary involved. According to the Block, Solana-based DEXs have been rapidly capturing market share from Ethereum DEXs like Uniswap for almost four months.
(You can access Solana-based DEXs via a compatible crypto wallet like Coinbase Wallet.)
Traders seeking to use a decentralized exchange on Solana need to buy some SOL to pay network fees, which has helped boost prices, as has all the attention Solana has been receiving: Search volume for “Solana” hit all-time highs this week.
"Solana has once again exploded as the trendiest crypto asset amongst traders with new meme tokens popping nearly every minute," Nick Ruck, COO of ContentFi Labs, told CoinDesk.
The bottom line…
This isn’t the first time traders have flocked to memecoins seeking major gains.
Some of the biggest meme-powered successes of the last cycle, like DOGE and SHIB, have become durable components of the cryptoeconomy. (Always remember that rapid gains tend to be paired with equally rapid losses, so be cautious if you decide to give the new wave of buzzy tokens a try.)
“There’s no way to know how sustainable this memecoin activity is,” Cosmo Jiang, a portfolio manager at crypto fund Pantera Capital, told Bloomberg. “But because people have to deposit money on Solana to trade those memecoins, as these users discover other use cases they are more likely to stay around. A lot of this volume could become other activity on Solana.”
NUMBERS TO KNOW
$1.4 trillion
Approximate value of the Government Pension Investment Fund of Japan. The fund is exploring adding BTC to its portfolio as a diversification tool, but hasn’t yet confirmed plans to make any purchases.
19 million
Number of registered crypto investors in Indonesia as of February — an increase of 170,000 users from the month before. February crypto transactions in the country totaled 30 trillion Indonesian Rupiah ($1.92 billion), according to the country's Commodity Futures Trading Supervisory Agency.
$13,000
Average trade size for BlackRock's iShares Bitcoin Fund, which analysts say indicates that most purchases have been from retail investors. “There's probably some advisers in there, but, largely speaking, based on the size of the trades, it looks like retail is definitely a big factor,” said Bloomberg Intelligence senior ETF analyst Eric Balchunas.
1%
Rough share of bitcoin’s total supply held by MicroStrategy. The company, which is the largest corporate holder of BTC, owns 214,246 BTC, valued at about $7.53 billion.
TOKEN TRIVIA
Which consensus mechanisms does Solana use?
A
Proof of work & proof of stake
B
Proof of copy & proof of time
C
Proof of history & proof of stake
D
Proof of time & proof of space
Find the answer below.
Trivia Answer
C
Proof of history & proof of stake
