On Thursday, amidst a rebound in the overall digital currency market, Solana (SOL), a prominent altcoin, surged above the $200 benchmark, registering an 8% growth within the past 24 hours.
This positive movement brings the sixth-largest cryptocurrency by market cap nearer to its record high reached in November 2024. Yet, experts warn of potential challenges that Solana might encounter in the days ahead.
A Cause for Concern Among Solana Investors
Ben Lilly, an analyst at Jarvis Labs, recently raised alarms regarding the anticipated “Grayscale Effect.” In a social media update, he cautioned of the impending release of Grayscale SOL tokens that could trigger substantial selling pressure on the altcoin.
Grayscale, a renowned digital asset management firm, has a policy in place to safeguard assets for a period of 12 months post-acquisition. With significant unlock periods approaching between January 24 to February 2 and July 24 to August 7, investors are advised to remain vigilant.
The operational model of the Grayscale Trust mirrors past scenarios with the Grayscale Bitcoin Trust. Investors would acquire Bitcoin (BTC) via Grayscale, which would retain the assets for a certain duration before issuing shares. This process led to a premium where shares traded at a higher price than the actual Bitcoin value, culminating in notable market surges.
Nonetheless, when this premium vanished, it signaled the peak of the market in 2021, resulting in setbacks for entities like Three Arrows Capital, BlockFi, Celsius, and Voyager.
Potential Price Decline Awaits Solana’s Value
Lilly underscores Grayscale’s adoption of a similar strategy with Solana, indicating that upcoming unlocks may usher in market volatility akin to previous crypto fluctuations.
The analyst refers to past instances where significant purchases of SOL tokens resulted in private placements being unlocked from late July 2024, leading to a 40% price drop in just ten days. Concerns are raised that a similar trend could follow with the January 2025 unlocks, potentially triggering a substantial sell-off. The theory posits that previous beneficiaries of premium advantages may flood the market with their holdings, exerting downward pressure on SOL’s price.
Lilly advises Solana holders to contemplate selling before the January 24 unlock date, as this event could shape the asset’s trajectory significantly.
While the Grayscale Trust for Solana represents a fraction of SOL’s overall market cap, the potential price impact looms large. Historical data suggests that even minor unlocks can wield substantial influence on market dynamics. While the anticipated sell pressure may not lead to catastrophic losses, it could usher in local peaks and a decline in premiums.
At present, SOL is valued at $205, marking a slight decline of over 20% from its peak of $263 recorded on November 24, last year.
Image source: DALL-E, chart from TradingView.com
The post How Grayscale’s 2025 Unlocks Could Trigger a Solana Sell-Off: Get Ready Now appeared first on Crypto Breaking News.
