Solana's ETF Launch Sparks Price Surge, But Onchain Data Raises Concerns

On Monday, SOL, Solana’s native token, jumped 7%. This leap came on the heels of the thrilling news of the first Solana-based exchange-traded fund (ETF) – including staking functionality! That news drove speculation among traders that institutional demand would push SOL’s price above $200—a key level for traders. SOL first surged to $161, but then corrected to $157. This adjustment led to a comparatively puny 4% improvement on the day. Underlying problems made visible by onchain data might endanger the sustainability of this rally.

SOL’s price has followed the same trend as its peer competitors ETH and BNB during the past 30 days. At today’s price of $157, SOL is still 47% off its all-time high of $295. The buzz around the anticipated launch of a Solana ETF with staking capabilities had everyone’s attention at first. There’s scant evidence that this ETF launch will trigger a massive SOL to $200 rally.

Solana’s network revenue has tanked over 90% since January – a clear sign that network activity is down dramatically. Moreover, some of Solana's most successful decentralized applications (DApps) have been regularly selling off their SOL holdings, adding to the selling pressure. SOL‘s funding rate reflected this bullishness with a positive 12.5% increase over a four-day period. Nonetheless, it was unable to break the neutral 10% barrier, a sign of lacking bullish conviction.

The resulting uptick in competition has blunted the overall price increase. Second, there doesn’t appear to be any demand for the Solana Trust instruments that have been listed so far. Even if Solana secures a first-mover advantage for a few months with its ETF, this effect could be offset by SOL staking unlocks and selling pressure from some of Solana's DApps.

Tokenized stock trading live on Kraken, Bybit and Solana’s DeFi ecosystem - CoinTelegraph

Though it started with the big news of the launch of the Solana ETF with staking capabilities. The tepid response from institutional investors is troubling. Onchain data tells a different story. Solana’s network activity has yet to fully recuperate. This worrying trend has implications for how sustainable that recent price boom may be.