5 times of ETH, 22 times of BTC, the funding efficiency is the biggest advantage of SOL digital asset treasury.

Author: Nom

Compiled by: Deep Tide TechFlow

TL;DR

The digital asset treasury (DAT) of -SOL will be more efficient in accumulating the current trading supply compared to ETH or BTC's DAT.

• The recently announced $2.5 billion SOL DAT is equivalent to $30 billion in ETH financing or $91 billion in BTC financing.

• The SOL from the FTX legacy is about to exit the market, but its narrative impact still needs further digestion.

• The inflation issue of SOL remains a hindrance to price increases, with its scale being approximately three times that of the unlocked amount, which needs to be resolved as soon as possible.

Do you really want to read the full content? Then let's first look at a few key points:

I won't discuss the pros and cons of inflation because I've already spent enough time on it, and I look forward to the upcoming changes.

I am a holder of spot SOL, staked SOL, and locked SOL (thanks to SPV on Estate SOL), so my perspective may be biased; I hope that the tokens I hold appreciate in value, while stagnant prices are negative for me.

Adverse factors: FTX legacy and market pressure

Like many well-known blockchains, Solana sells tokens to investors through multiple rounds of financing. A large number of tokens were directed to FTX. According to a report by @CoinDesk's @realDannyNelson, FTX held 41 million SOL at the time of its bankruptcy, most of which were sold through several rounds of financing, with major buyers including Galaxy and Pantera, at exercise prices of approximately $64 and $102 (plus associated fees). Based on the current price of around $190 for SOL, these investments have generated substantial profits.

By analyzing the staking account, the "FTX Legacy SOL" currently has approximately 5 million units pending unlock, with a total value of about 1 billion dollars.

Why mention this?

Recently, Galaxy and Pantera announced SOL DAT plans of $1.25 billion and $1 billion respectively, along with $400 million from Sol Markets, totaling about $2.5 billion (excluding related costs). The question is whether this will have a substantial impact on Solana's price, as the SOL locked in the market could be bought or allocated by these entities. According to data from @4shpool(gelato.sh), there are approximately 21 million units of SOL left to be unlocked until 2028, with a total value of about $4 billion. A rough estimate (more detailed model analysis can be provided by professional financial analysts) shows that "FTX legacy SOL" accounts for about a quarter of the remaining unlockable amount.

On the other hand, the inflation issue of Solana is also worth noting. Currently, the inflation rate is generally considered to be around 7-8%, but the actual inflation rate is about 4.5% of the circulating supply. This means that if the supply of approximately 608 million SOL in the 839th cycle is calculated, the supply will increase by about 27.5 million (inflation) and 10 million (unlocking) after a year, bringing the total circulating supply to about 645.5 million, with an inflation rate of about 6.2%. Again, this is just a theoretical calculation, and I will let more experienced analysts take a look and provide you with more accurate charts.

The sharp increase in circulating supply indicates that the "static" inflation rate is not accurate; it can spike significantly at certain points in time while being lower at others. We have completed the remaining major unlocking time points.

We need to pay attention to a key number: the amount of SOL entering the market daily. If someone receives tokens for free (for example, through staking inflation or unlocking) or obtains tokens at a discount (such as FTX legacy SOL), it can be expected that a portion of those will be sold. I assume that the inflation of 37.5 million SOL in the next year will be sold entirely. If I want the price to rise, this is bad news for me - see point 2. Therefore, we need capital inflow, which can be achieved through DAT or ETFs (for example, $SSK) (thanks to the @REXShares team for creating and submitting the BONK ETF, which is openly recommended). Ideally, every dollar spent on purchasing SOL should enter the market, driving the price up. But when SOL can be purchased at a locked or discounted price, this method is less efficient. Therefore, we assume that greedy DAT actors will buy these tokens before they are unlocked.

Is that very bad?

Brief answer: Not bad. To offset the annual supply of 37.5 million SOL (assuming a price of 200 USD per SOL, under ideal expectations), the market needs about 7.5 billion USD in capital inflow, or about 20.5 million USD per day (this is simplified and does not consider trading days from Monday to Friday and bank holidays). If DAT can purchase tokens at a discounted price from the FTX estate SOL or other locked SOL areas, it will enhance the efficiency of capital inflow.

For example, raising $400 million to purchase SOL at a 5% discount equates to a $420 million capital inflow, which is clearly better than directly injecting $400 million into the market. The only question is how to evaluate the time value of purchasing SOL from the market today versus the reduced sales in the future.

The SOL inflation rate in the next three years will be higher than the unlock amount (with the unlocking plan ending in 2028), and the FTX legacy SOL only accounts for a quarter of the remaining unlock amount. Therefore, DAT's priority in purchasing legacy SOL instead of SOL on the market will not significantly impact the overall market. Either Galaxy or Pantera could clear the remaining supply (assuming all legacy SOL is available for sale), not including existing DATs, such as @defidevcorp, @solstrategies_ or @UpexiTreasury (as well as existing ETPs).

Good news: Trading Supply vs Circulating Supply

The funds spent on SOL are more efficient than those spent on ETH or BTC for two main reasons.

Trading Supply

First of all, the circulating supply does not equal the tradable supply on the market, especially for staked assets. Staked SOL cannot be directly purchased, but staking token derivatives (LSTs) can be bought. According to data from the @solscanofficial team, Solana currently has 608 million SOL, of which 384 million SOL have been staked, accounting for 63.1%. LSTs account for 33.5 million SOL, so the actual tradable supply in the market is about 57.5% (about 35 million SOL are non-tradable, with at least a two-day delay). In comparison, the staking ratio for ETH is 29.6%, with LSTs accounting for 11.9%. The higher supply in the market makes price fluctuations harder to achieve, while the lower trading supply of SOL helps drive the price up.

Relative Capital Efficiency

Solana's market capitalization is significantly lower than that of ETH and BTC, with a circulating market value of about $104 billion, while ETH stands at $540 billion and BTC at $2.19 trillion. Therefore, every dollar invested in SOL DAT is equivalent to an investment in ETH DAT that is 5 times more effective and 22 times more effective in BTC DAT. When considering the staked supply, this efficiency increases to 11 times and 36 times respectively.

The benefits of these DATs lie in their removal of supply from the market, earning tokens through staking rewards (which have already been accounted for in the inflation mentioned above), and enabling subsequent tools like ETFs to drive the market more effectively. Since its launch, SSK has seen approximately $2 million in daily inflows, but the inflation plan requires 10 times that amount in inflows—this may be achieved with the approval of more ETFs.

Why read this content?

I have never registered for Elon bucks, so this is a mystery for all of us.

Summary

• Compared to ETH or BTC DAT, SOL DAT will accumulate the current trading supply (rather than the circulating supply) more effectively. Currently, less than 1% of the supply is managed by SOL DAT, and this ratio is expected to increase to 3% with the launch of new programs, potentially reaching 5% in the future.

• The recently announced $2.5 billion SOL DAT is equivalent to $30 billion in ETH funding or $91 billion in BTC funding. SOL DAT needs a leading figure like Michael Saylor or Tom Lee to drive the narrative.

-SOL from the FTX legacy is about to exit the market, but its narrative impact still needs further digestion.

• The inflation issue of SOL still needs to be addressed, with its scale being approximately three times the unlocking amount.

• The current inflow of funds into ETFs is insufficient, but as larger financial instruments are approved, SOL is expected to become a focus for institutions starting in Q4.

• Buy $BONK (not investment advice, please do your own research).

-If you just want to get investment advice from posts like this, it is recommended that you find a more professional quantitative analyst to manage your assets.