Solana - the party is over... ☢ Sol Crypto Token Analysis
Summary
TLDRThe video discusses the current state of the cryptocurrency market, focusing on Solana's performance amidst a downturn. It explores on-chain metrics, the impact of meme coin trading, and compares Solana's total value locked with other blockchains. The script delves into Solana's staking trends, token inflation, and its relative performance to Bitcoin and Ethereum, suggesting caution due to market correlations and potential risks, with a personal inclination towards shorting underperforming assets.
Takeaways
- 📉 The market is currently experiencing a downturn, with Solana being significantly affected by the decline in prices.
- 🔍 On-chain metrics suggest that Solana has been primarily used for meme coin trading, which lacks real-world utility and is player versus player, leading to a concentration of capital and a decline in transactions over time.
- 📊 Solana's total value locked has decreased by 11% in the last month, which is a moderate loss compared to other blockchains like Ethereum and Arbitrum.
- 💰 Despite a decrease in trading volume, the liquidity on decentralized exchanges has remained relatively constant, which is surprising as one would expect a correlation between capital and trading activity.
- 📈 An interesting positive trend is the increase in Solana being staked, which locks up more supply and could theoretically increase the price due to reduced availability.
- 🚫 However, Solana's token inflation rate of 5.2% annually means that the staking program cannot fully offset the supply expansion, resulting in long-term sell pressure.
- 🤔 The relative performance of Solana is more important than its performance in USD, as investors seek to outperform the broader market, especially Ethereum, which Solana competes with.
- 🔗 High correlation coefficients indicate that most altcoins, including Solana, are more closely tied to Ethereum's performance than Bitcoin's, suggesting a speculative investor base.
- 📌 Solana's dominance in the cryptocurrency market is at around 3%, which is somewhat at a historical high, but there is significant room for growth relative to Bitcoin.
- 💔 The lack of growth in the stablecoin market cap over the last few months suggests a halt in new fiat currency entering the crypto space, which could lead to a bear market.
- 🚫 The speaker personally believes the risk-reward ratio for Solana is not favorable at the moment, with too much capital locked in decentralized exchanges and a lack of new money entering the market.
Q & A
What is the current state of the cryptocurrency market according to the transcript?
-The cryptocurrency market is described as 'absolute crap,' with Solana being significantly affected by the price declines.
Why does the speaker believe Solana has turned into a 'meme coin casino'?
-The speaker suggests that Solana has been primarily used for meme coin trading, which lacks real-world usage and is purely player versus player, leading to a concentration of capital in fewer hands and a decline in transactions over time.
How does the speaker analyze the on-chain metrics for Solana compared to other blockchains?
-The speaker compares Solana to other blockchains using data from defy Lama, noting that Solana lost 11% of its total value locked in the last month, which is a middle-of-the-pack performance compared to Ethereum, Binance Smart Chain, and Arbitrum.
What is the speaker's view on the correlation between trading activity and capital in decentralized exchanges?
-The speaker notes that trading activity has declined, but capital in decentralized exchanges has remained relatively constant, suggesting that the returns for capital providers, paid out via trading fees, should theoretically decrease as trading volume goes down.
How does the speaker describe the current trend in Solana's NFT marketplace platform fees?
-The platform fees for NFT marketplaces on Solana have been on a clear downtrend, peaking at the beginning of March and declining since then.
What is the significance of the increasing amount of Solana being staked according to the speaker?
-The speaker points out that an increasing amount of Solana being staked means more of it is getting locked up, which should theoretically reduce supply and, according to economic principles, could lead to an increase in price.
How does the speaker address the issue of token inflation in Solana?
-The speaker explains that despite the staking program, Solana's token inflation rate of 5.2% means that new tokens are being introduced to the market faster than they are being locked up, creating long-term sell pressure.
What does the speaker consider when evaluating the relative performance of Solana?
-The speaker evaluates Solana's performance relative to Bitcoin and Ethereum, noting that while Solana has room to outperform Bitcoin, its potential upside against Ethereum is limited, and the potential downside is significant.
Why does the speaker believe most altcoins are more correlated with Ethereum than with Bitcoin?
-The speaker suggests that the investor profiles for Ethereum and Solana are more speculative and enjoy the player versus player aspect of trading, whereas Bitcoin investors are more interested in long-term allocation and diversification.
What is the speaker's view on the current state of the stablecoin market and its impact on the overall crypto market?
-The speaker notes that the stablecoin market cap has stopped growing for the past 2-3 months, indicating a lack of new fiat currency flowing into crypto, which is a bearish signal for the overall market.
What is the speaker's personal strategy given the current market conditions?
-The speaker is shorting a token due to its underperformance, high relative valuation, and increasing token supply, believing that the risk-reward ratio does not favor Solana at the moment.
Outlines
📉 Solana's Market Decline and On-Chain Metrics
The market is struggling, and Solana is not immune to the price declines. Analyzing on-chain metrics reveals a heavy involvement in meme coin trading, transforming Solana into a 'meme coin casino'. This shift results in declining transactions as the game continues, concentrating capital in fewer hands. Compared to other blockchains, Solana's total value locked has decreased by 11% over the last month, similar to Ethereum, with larger losses seen in other platforms. Despite a decrease in trading activity and NFT marketplace fees, the capital in decentralized exchanges remains stable. This stability contrasts with the expected correlation between capital and trading volume, which typically affects liquidity pools and trading fees.
📊 Solana's Performance and Staking Trends
Solana's staking activity is on the rise, which should theoretically reduce the supply and increase the price. However, this is offset by a 5.2% annual inflation rate, adding 24 million tokens to the market each year. This new supply surpasses the amount being staked, creating long-term sell pressure. Unlike Bitcoin's shrinking supply or Ethereum's deflationary mechanism, Solana faces a growing supply. Relative performance analysis shows Solana's dominance in the cryptocurrency market at 3%, with potential for outperformance against Bitcoin and Ethereum. Despite hitting historical highs, the downside risk remains significant, highlighting the speculative nature of altcoin investments.
Mindmap
Keywords
💡Solana
💡On-chain metrics
💡Meme coin
💡Liquidity pool
💡Total value locked (TVL)
💡Decentralized exchanges (DEX)
💡Staking
💡Token inflation
💡Relative performance
💡Correlation coefficients
💡Stablecoin market cap
Highlights
The Solana market is experiencing a downturn, with price declines that have not spared the cryptocurrency.
The speaker suggests using on-chain metrics to identify potential buying opportunities during market dips.
Solana has been primarily used for meme coin trading, turning into a 'meme coin casino'.
Meme coins lack real-world usage, leading to player versus player dynamics and a concentration of capital in fewer hands over time.
Defi Lama data shows a loss of 11% in total value locked on Solana in the last month, compared to other blockchains.
Despite a decline in trading volume, liquidity on decentralized exchanges has not been significantly affected.
The platform fees of NFT marketplaces on Solana have peaked and are now in a clear downtrend.
An interesting trend is the increase in Solana being staked, which locks up more tokens and could theoretically increase price.
Solana faces token inflation with an annual inflation rate of 5.2%, which may offset the benefits of staking.
The speaker discusses the importance of outperformance when investing in altcoins like Solana over more stable assets like Bitcoin.
Solana's dominance in the cryptocurrency market is at around 3%, which is somewhat at a historical high.
The potential upside for Solana relative to Ethereum is limited, with a more significant potential downside.
Altcoin correlation coefficients show that most altcoins, including Solana, are more highly correlated with Ethereum than with Bitcoin.
The stablecoin market cap has stopped growing, indicating a lack of new fiat currency flowing into crypto.
The speaker shares a personal strategy of shorting tokens with increasing supply and underperformance, like Solana.
The speaker provides a tutorial on how to bet on falling prices as part of a premium membership.
A free Telegram group is offered for further discussion and sharing of investment strategies.
Transcripts
the market is absolute crap and Solana
is not getting spared from the price
declines let's have a look at some
onchain metrics let's have a look at
actual usage is this potentially an
opportunity to buy this dip because I
believe the best way to beat the market
is to have better data than most others
right if we want to figure out where
bottoms and tops are we need to find out
who's buying who's selling who's using
Solana now we all know what Solana have
been used for in the last months and
that was meme coin trading just have a
look at this this is dec.com and this is
all tokens ordered by their liquidity
pool size and we pretty much only see
meme coins here Solana completely turned
into a meme coin casino and since memec
coins don't have any real world usage
it's 100% player versus player and of
course there's a luck component involved
but there's also skill involved as in
the people that are more skilled tend to
make make money from the memec coin game
thus the longer the game goes on the
more Capital gets concentrated in a few
hands and the majority loses their funds
that's the reason why transactions tend
to decline over time if there's no new
people coming into the space now let's
compare Solana to other blockchains this
is defy Lama and this shows the total
value locked development in the last
month here on the second last column
Solana lost 11% of its total value in
the last last month with that number
it's pretty much in the middle ethereum
lost to a similar degree Bas lost even
more arbitrum lost a little bit less
this is then how that looks like over
time this was the first defi summer in
2021 then we saw the nice Revival since
October of last year this is where mem
con trading started and now in the
recent past we see again quite a bit of
a hiccup the liquidity on decentralized
exchanges isn't yet that much affected
and that's quite surprising because the
people that deposit their Capital into
decentralized exchanges into those
liquidity pools they get their return
paid out via the trading fees so when
you're trading say on radium then you're
paying a fee and the fee goes partially
to liquidity pool providers when trading
volume goes down then in theory the
return of the capital providers goes
down as well and thus the incentive to
deposit goes down as well so there
should be at least long-term a
correlation with the capital in
decentralized exchanges and trading
activity trading activity went down but
the capital so far is still relatively
constant so here's that trading activity
it peaked out in the middle of March of
this year since then we rather see a
decline other narratives unfortunately
can't catch up either this is the
platform fees of nft marketplaces on
Solana that peaked out even a bit
earlier at the beginning of March of
this year but also a very clear
downtrend unfortunately and and if
history is any indication that low level
can sustain for quite a while now not
all charts are going down an interesting
chart that's going up is how much Solana
is being staked so more and more so gets
locked up this should reduce the supply
and with a reduction in Supply the price
in theory should go up so have a look at
this that's a Solana that's been staked
measured in s so and this continues to
increase quite a bit but here's the
problem Solana also has token in
inflation we've got a circulating supply
of 462 million so tokens this is the
supply development over time and we are
currently at an annual inflation rate of
5.2% roughly 5.2% of the current Supply
equals to 24 million so tokens that hit
the market every year let's check this
out again this is in total 24 million
but this didn't happen in one year this
happened over the span of 3 years so
it's roughly only onethird of the newly
added Supply every year that gets locked
up so the staking program is relevant
but relative to the supply expansion it
can't unfortunately supersede this so
there's still long-term sell pressure on
S so this is not like ethereum where
we've got a shrinking Supply or like
Bitcoin where a l Supply gets scooped up
by the Bitcoin ETF or where some of that
Supply even gets lost for Bitcoin on
average roughly 2% per year gets lost
now let's have a look at relative
performance I don't just like to look at
us dollar charts right because when
Bitcoin goes up and ethereum goes up
then Sol tends to go up as well and vice
versa what I believe is more important
is outperformance because that's in the
end the reason why we get into altcoins
in the first place right we take on more
Risk by buying Solana over Bitcoin thus
we want to get more performance right if
you take on more risk you need to have
more performance and so this is the
chart most people look at this is just
Solana in US dollars and historically we
seem to be relatively high and we can
see very nicely that since Q3 of last
year so performed quite well in terms of
US Dollars again but there's another
measure this is Solana dominance this is
how much of all of cryptocurrencies
market cap is in Solana and that's
currently at roughly 3% and that is
somewhat at the Historical High here
Solana relative to bitcoin it's not at
an historical High there's actually
quite a bit of room if Solana was to
catch up with bitcoin's performance
reach those historical highs that' be
another outperformance of roughly 80%
but here's the chart that I believe is
actually the most important and that is
Solana relative to ethereum because
Solana and ethereum are competing for
similar spaces and here we see how
nicely those tops align we have recently
hit several times the peaks of 2021 and
the potential upside isn't that massive
anymore it's 35% until the a gets thin
again the potential downside though is
pretty high right- 66% or maybe in the
worst case minus 80% now why do the tops
align here so well in the ethereum based
chart I believe the answer is
correlation have a look at those various
altcoin correlation coefficients
relative to bitcoin and relative to
ethereum the higher the number is the
more those two assets tend to move in
tendem with one another and the numbers
here in the First Column tend to be
lower than the number in the second
column this is true for the 90-day
correlation coefficient it's also true
for the onee correlation coefficient the
numbers to ethereum tend to be higher
than to bitcoin so most altcoins tend to
be higher correlated to ethereum so
actually what we are doing with buying
an altcoin is we try to outperform
ethereum not necessarily Bitcoin the
kind of person that buys into Bitcoin is
not necessarily the same kind of person
that buys into ethereum or into Solana
the ethereum and Solana investors tend
to be more speculative in nature they
tend to enjoy this player versus player
game much more the Bitcoin investor
simply just wants to allocate and forget
maybe Diversified together with the
stock Investments and the property
Investments and so when it's the same
kind of person that buys ethereum and
that buys Solana then that same kind of
person might also decide to enter and
exit the market pretty much the entire
portfolio that's probably one of the
reasons why we see that much correlation
with ethereum to the altcoins and that's
probably also the reason why we see
those tops align so nicely for Solana
relative to ethereum and so here's the
reason why the market is suffering so
much this here is the stable coin market
cap and that market cap unfortunately
isn't growing for the last 2 to 3 months
there's no more fiat currency flowing
into crypto that can push up the prices
in aggregate here's a more long-term
chart of that stablecoin market cap when
this is going up then crypto is
expanding when this is going down we
tend to be in a bare Market currently we
are expanding again since October of
last year but unfortunately that
expansion has recently stopped and maybe
we will see a crash again very similar
to the Tera Luna collapse right when the
anchor protocol went belly up I don't
really like to get risk on right now I
believe the risk versus reward isn't
really warranted for Solana I believe
that there's still too much Capital
locked up in the decentralized exchanges
relative to the trading volume so people
don't really get a lot of trading fees
at the same time we don't see a lot of
money flowing into crypto as a whole at
the same time we see that there's maybe
another 30% outperformance versus
ethereum but a lot of potential
underperformance again rative valuation
is pretty high and when the situation is
so Bleak why not bet on falling prices
on things like this I'm shorting this
token over here very little volatility
very constant underperformance because
again the token Supply is increasing
relatively fast and I've made a tutorial
on how to bet on falling prices over
here feel free to check it out it's part
of the premium membership it's down
below it's the Bitcoin trade.com this is
also where I'm sharing what this asset
actually is if you've got like $3,000 or
so to put on this short premium should
be for free again I can't of course
guarantee this there's always risk in
any investment but that's what I'm
personally doing right I'm not trying to
find the needle in the Hy stack the one
asset that might outperform the rest
right now there's no more crypto
expansion it's player versus player so
why not simply go with the Hast deck
underperforming right and most altcoins
do worse than Bitcoin most of the time
why not bet on that and get the odds in
our favor if your portfolio isn't yet
large enough to justify premium there's
also a free telegram the link is as well
down below looking very much forward to
chatting with you cheers
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