Solana Surges Past $200 Amid Concerns Over Grayscale Unlocks
On Thursday, the cryptocurrency market showed signs of recovery, with Solana (SOL) surpassing the $200 mark, reflecting an 8% increase in 24 hours. This movement brings the sixth-largest cryptocurrency by market capitalization closer to its all-time high from November 2024. However, experts warn that Solana may face significant selling pressure in the near term.
A Double-Edged Sword For Solana Investors
Market analyst Ben Lilly from Jarvis Labs highlighted risks associated with the "Grayscale Effect." In a social media post, he noted that the upcoming Grayscale SOL token unlock could lead to substantial selling pressure. Grayscale enforces a 12-month asset protection policy after acquisition, with major unlocking periods occurring from January 24 to February 2 and July 24 to August 7. Investors are advised to remain vigilant.
The mechanics of the Grayscale Trust mirror those of the Grayscale Bitcoin Trust (GBTC), where investors purchase assets through Grayscale, which holds them before issuing shares. This created a premium where shares traded above the actual asset price, contributing to market rallies. The disappearance of this premium marked the peak of the 2021 market, leading to failures for firms like Three Arrows Capital and BlockFi.
Potential Price Drop Ahead For SOL’s Price
Lilly suggests that Grayscale's strategy with Solana could replicate past volatility. He noted previous large SOL token purchases saw private placements unlocked from late July 2024, resulting in a 40% price drop within ten days. Concerns exist that similar trends may arise with the January 2025 unlocks, potentially triggering a significant sell-off as investors who benefited from past premiums flood the market, creating downward pressure on the SOL price.
Lilly recommends that Solana holders consider selling before the January 24 unlock date, which could be a critical turning point for the asset. Although the Grayscale Trust for Solana is relatively small compared to SOL's overall market cap, its potential impact on price should not be underestimated. Historical trends indicate even minor unlocks can significantly affect market behavior. While upcoming sell pressure may not cause catastrophic losses, it could lead to local peaks and reduced premiums.
Currently, SOL is priced at $205, down more than 20% from its peak of $263 reached on November 24 last year.
Featured image from DALL-E, chart from TradingView.com