The efficiency magic of SOL treasury: 2.5 billion dollars not losing to Ethereum's 30 billion?

Written by: Nom

Translated by: Luffy, Foresight News

TL;DR

Compared to the DAT (cryptocurrency treasury) of Ethereum or Bitcoin, SOL DAT is more efficient in absorbing the current trading supply (which is different from circulating supply).
The recently announced $2.5 billion SOL DAT plan is equivalent to a financing scale of $30 billion for Ethereum or $91 billion for Bitcoin.
We are finally close to eliminating the impact of SOL held by FTX's bankruptcy liquidation on the market (though the narrative impact of FTX still needs to be addressed).
The inflation issue of SOL will still hinder its price increase and needs to be resolved, with the inflation scale being about three times the amount to be unlocked.

Oh? Do you really want to read this? First, let me make a few points:

I won't argue whether inflation is good or bad; I've talked enough about it and will just wait for future changes.
I personally hold SOL spot, stake SOL, and lock SOL, so I may have biases. I certainly hope the tokens I hold increase in price, so to me, a stagnant token price is a bad thing.

Bad News: FTX's Bankruptcy Liquidation and Your Money

Like many blockchain projects you know and love, Solana also sold tokens to investors through multiple rounds of financing, with a large number of tokens flowing into FTX. When FTX went bankrupt, it held 41 million SOL in liquidated assets, most of which were sold through several rounds of transactions, primarily taken over by institutions like Galaxy and Pantera, with exercise prices of about $64 and $102 (plus fees). Given Solana's current price of about $190, these transactions are now quite profitable. Through in-depth analysis of the staking accounts, the remaining amount of "liquidation SOL" to be unlocked is about 5 million, with a nominal value of about $1 billion at current prices.

Why mention this?

Recently, Galaxy and Pantera announced SOL DAT plans of $1.25 billion and $1 billion, respectively, and Sol Markets also joined in with a planned scale of $400 million. Including fees, the total scale of these DATs is about $2.5 billion. Some are concerned that this won't have a substantial impact on Solana's price, as there are currently a large number of locked SOL that may be purchased by these institutions. According to data from @4shpool, as of 2028, there are still about 21 million SOL to be unlocked, with a nominal value of about $4 billion at current prices. Roughly estimated, "liquidation SOL" accounts for about 1/4 of all remaining SOL to be unlocked.

Another issue with Solana's inflation is its own inflation rate. When mentioning Solana's inflation rate, it is usually said to be 7%-8% when including the unlocked amount, but the actual inflation rate is about 4.5% of the circulating supply. This means that if the circulating supply in the 839th cycle is about 608 million SOL, the new supply from inflation after one year would be about 27.5 million SOL, plus 10 million from the unlocked amount, bringing the circulating supply to about 645.5 million SOL, with an inflation rate of 6.2%. Again, this is just a rough calculation, and more experienced analysts should provide more accurate charts.

The surge in circulating supply shows that the claim of a "fixed" inflation rate is not accurate: it will rise significantly at two time points and be lower at other times.

"Alright, nerd, your math isn't even accurate. Why should I read this?"

The key point is one number: the amount of SOL flowing into the market daily. If someone gets tokens for free (staking inflation/unlocking) or at a discount (FTX's SOL), it is foreseeable that a certain proportion of people will sell. I assume that the inflation amount of 37.5 million SOL in the next year will all be sold. If we want the price to rise, this is not a good thing. Therefore, we need capital inflow, which may come from DAT or from ETFs like SSK (launched by REXShares). Ideally, every dollar used to buy SOL should flow into the market, pushing the price up. But if there is an opportunity to buy locked or discounted SOL, there is no need to buy it in the market. So let's assume that those DAT institutions will buy up the liquidation SOL before it flows into the market.

Is this a bad thing?

In short, no. To offset the selling pressure of 37.5 million SOL in the next year (assuming the SOL price is $200, purely optimistic speculation), about $7.5 billion of capital inflow is needed each year, which is about $20.5 million per day. If DAT can buy liquidation SOL or other locked SOL channels at a discount, it can improve the efficiency of capital inflow.

Raising $400 million to buy SOL at a 5% discount is equivalent to bringing in $420 million in capital inflow, which is more cost-effective than directly investing $400 million. The only question is how to weigh the time value of buying SOL from the market now versus reducing selling pressure in the future.

In the next three years, Solana's inflation scale will exceed the unlocking amount (the locking plan ends by the end of 2028), and FTX's SOL only accounts for 1/4 of the remaining unlocking amount—so there is actually no need to worry about DAT buying liquidation SOL instead of buying from the market. As long as there is enough liquidation SOL for sale, any one of Galaxy or Pantera can digest the remaining amount, not to mention existing DATs like DeFi Dev Corp, SOL Strategies, or Upexi, as well as existing ETPs.

Good News: Trading Supply vs Circulating Supply

Investing in SOL is more efficient than investing in ETH or BTC for two main reasons.

Trading Supply

First, circulating supply does not equal market tradable volume, especially for staked assets. You cannot buy staked SOL, but you can buy LSTs (liquid staking tokens). According to data from the @solscanofficial team, of the current 608 million SOL in Solana, 384 million are staked, accounting for 63.1%, and cannot circulate in the market. The corresponding SOL amount for LSTs is 33.5 million. If we consider this part as purchasable supply, roughly calculated, about 350 million / 508 million SOL are locked, accounting for 57.5%, and cannot be purchased (at least have to wait two days to unlock). In contrast, the staking rate for ETH is 29.6%, and LSTs account for 11.9%. The higher the market tradable volume, the harder it is to push the price, but the differences in ETH's unlocking plan and various chain DeFi platforms also clearly have an impact.

Relative Capital Impact

Solana's valuation is far lower than that of ETH and BTC. Solana's current circulating market value is about $104 billion, while ETH and BTC are $540 billion and $2.19 trillion, respectively. From a relative valuation perspective, investing $1 in SOL DAT is equivalent to investing $5 in ETH DAT or $22 in BTC DAT. When combined with the differences in circulating supply brought by staking, the efficiency gap expands to 11 times that of ETH and 36 times that of BTC. The good news is that these DATs will reduce market supply and can also earn token rewards through staking (we have assumed this part will be sold), making the impact of subsequent buying behaviors like ETFs on market prices more significant. Since its launch, SSK has seen about $2 million in daily capital inflow, but offsetting inflation requires 10 times the capital inflow, which may only be realized after more ETFs are approved.

Conclusion

Compared to the DAT of ETH or BTC, SOL DAT is more efficient in absorbing the current trading supply (which is different from circulating supply). Currently, the supply managed by SOL DAT is less than 1%, and with the implementation of three newly announced plans, this ratio may rise to 3%, and if more subsequent plans are introduced, it could reach 5%.
The recently announced $2.5 billion SOL DAT plan is equivalent to a financing scale of $30 billion for ETH or $91 billion for BTC. SOL DAT needs a promoter like Michael Saylor or Tom Lee; the narrative is key.
We are finally close to eliminating the impact of FTX's liquidation SOL on the market (though the narrative impact of FTX still needs to be addressed).
The inflation issue of SOL will still hinder its price increase and needs to be resolved, with the inflation scale being about three times the amount to be unlocked.
Current ETF capital inflow is insufficient, but larger-scale products are expected to be approved by early Q4, and SOL remains a potential choice for institutional investors.

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