Andrew Kang, co-founder of Mechanism Capital, expressed concerns about the potential volatility and impending price correction of Solana (SOL) in the market. analysis posted on
He states, “I believe the timeline for this is behind by 1-2 quarters. Some market views. Experts now suggest that approval of applications/ETFs added to wealth management platforms is expected in the fourth quarter, rather than the end of May as originally suggested.” He believes this delay in ETF approvals could result in a lack of immediate capital inflow into the market, potentially reversing the current upward momentum.
Impacting the broader crypto market, Kang’s prediction for Solana is less optimistic. It highlights Solana’s price volatility, which has been significantly influenced by meme-driven trading activities.
“Solana has been a great horse this cycle, but meme trading demand reflexivity has been seen to work in both directions. If meme trading takes a break in the next few months, then you will likely be able to buy SOL near $80 again,” he noted, indicating a potential 41% decline in SOL’s price from its current price level.
Reasons for a potential drop in Solana price
Crypto Analyst TexasHedge Even More elaborate on Kang’s insights, providing a nuanced view of the market dynamics that influenced Solana’s price movements. He discussed Solana’s historical attractiveness as a high-risk, high-reward investment, often referred to metaphorically as “the best casino in the world.”
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This environment attracted significant capital inflows, which were crucial in driving Solana’s valuation during its peak periods. “Kang’s SOL comment makes a lot of sense. Solana remains arguably the best casino in the world, but casino outflows are as painful for the SOL token as inflows were beneficial,” the crypto analyst noted.
TexasHedge shared its previous investment approach, which saw Solana as an attractive trade based on several factors: Initially, it involved reevaluating Solana, which had been considered a laggard in the crypto space due to FTX collapse but then it gained momentum. Another factor was the strong capital inflow into SOL due to the memecoin frenzy. Lastly, Solana’s movement has often reflected broader crypto market trends, benefiting from the market’s overall beta.
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Reflecting on these factors, TexasHedge noted: “I liked SOL in October 2023 as a three-part trade: (i) reclassification of a supposed dead chain, (ii) inflows to the world’s best casino, and (iii) crypto beta. Now we are left with basically (iii), at much higher levels and amid a scenario where it is difficult to argue that SOL is the best expression of crypto beta.”
Additionally, the analyst pointed out several structural challenges Solana faces that could contribute to a downward price correction. This includes an inherent annual inflation of 5.21%, translating into approximately 82,570 SOL entering the market each year – worth approximately US$11.1 million at current prices – and the regular monthly release of Locked SOL acquired from FTXwhich increases supply and potentially depresses prices if demand does not match.
“Even in the absence of a cooling of memecoin mania, the outlook for the coming months is challenging,” concluded TexasHedge, indicating a difficult road ahead for Solana amid reduced speculative memecoin trading and continued market pressures.
At press time, SOL was trading at US$137.
![Solana Could Face a 41% Drop: Mechanism Capital Co-Founder 1 Solana Price](https://thegurumedia.com/wp-content/uploads/2024/06/SOLUSD_2024-06-20_12-08-48.png)
Featured image from CoolWallet, chart from TradingView.com