Recently, MarketVector, an asset management company owned by VanEck, published an article in which it not only mentioned the many advantages and potential of Solana, but also discussed why institutions have been slow to adopt Solana. Comparing previous VanEck reports, it can be found that both set the target price of Solana at 330~335 US dollars, which is about half of the current market value of Ethereum.

VanEck's corporate propaganda agency: Missing Solana will miss a great opportunity

Martin Leinweber, director of digital asset research and strategy at MarketVector, noted that Solana processes 3,000% more transactions and has 1,300% more daily active users than Ethereum because its transaction fees are much cheaper compared to Ethereum. However, its market capitalization is only 22% of Ethereum’s. He said that these gaps make people see the potential scalability advantages of Solana; but it also makes people wonder why the migration trend from Ethereum to Solana has not yet been seen (especially institutions).

Martin Leinweber pointed out that choosing the right Layer 1 will be a long-term investment choice with a relatively high success rate in the cryptocurrency world.

Between Ethereum and Solana, retail investors have realized Solana’s advantages. However, Ethereum’s first-mover advantage and institutions’ familiarity with it are the reasons why institutions have not yet clearly adopted Solana. But in short, the market has its own cycles, and assets such as Ethereum will also have overheating problems. Therefore, Martin Leinweber also warned that institutions need to carefully consider investing in undervalued assets such as Solana in a timely manner, otherwise they will miss great opportunities.

He also mentioned the possibility of including high-quality Layer 1s such as Solana and Ethereum into index investments. Although the idea has been around for a while, he thinks it’s a good way to balance investing in Solana with Ethereum. In this report, MarketVector predicts that Solana’s market capitalization will reach 50% of Ethereum’s, reaching a price of $330.

VanEck’s pricing for Solana will reach 335 mg, and there is no need to worry about the public chain losing money.

A previous VanEck report also priced Solana at $335 using their own valuation framework. But they also said Solana’s ability to capture value is not as good as Ethereum’s. Despite its huge potential, they are also not optimistic about Solana surpassing Ethereum in 2030. Although Solana's network efficiency is better, it lacks the motivation for developer and user adoption. With a market capitalization of US$74.2 billion, TVL is only US$5.45 billion. The daily active user ratio isn't that great either, with 184,000 users out of 5.5 million.​

Source: VanEck Research

There is also an interesting topic, "How will Solana be profitable in the long term given the low transaction fees?" Token Terminal has previously pointed out that due to low transaction fees, Solana only achieved less than US$100 million in revenue in the hot market of 2024 Q1, but its network operating costs were as high as US$800 million.

Blockchain transaction fees must be cheap enough to be widely used. But at the same time, it still needs to ensure that its validators are paid enough to validate the network. Blockchains like Solana compensate validators by diluting existing token holders by issuing additional tokens to pay validators. If there is no economic activity or on-chain transaction fees are too cheap, then the model of simply paying validators through inflation cannot continue indefinitely.

VanEck calculated that Solana’s annual transaction volume in 2030 would be approximately $600 billion, based on the figure that Solana’s monthly active users will reach 534 million in 2030. Although MEV will be Solana’s most important value capture mechanism, accounting for 67.5% of all revenue under basic circumstances,

VanEck said that even if Solana doesn’t attract $600 billion in transactions per year, they have ways to increase the value of the token. The first is to increase the transaction price, and while increasing the price will certainly see transaction volume decrease, if there is activity of economic value, then Solana should be able to effectively capture some of that value.

In addition, Solana can also reduce the supply of its tokens by increasing the amount of tokens charged for storing data on the chain. Because running DApps or using wallets on Solana, you must pay on-chain data storage fees in the form of SOL according to its storage size. Anyone using Solana can choose to forego paying this fee and simply keep enough SOL in the account to cover 2 years of rent. If Solana chooses to do this, it will significantly reduce the supply of SOL.

But in any case, there should be no need to worry about Solana Network losing money in the short term. Solana's pricing strategy has captured a large amount of market share despite operating costs that make it difficult to make ends meet. The price of SOL tokens also took off. In fact, the loss in operating costs should be a drop in the bucket compared to the floating profit of the tokens held by the foundation.

The article VanEck Prices Solana at Fair Price for 330 mg, Calls Institutions to Hold SOL appeared first on Chain News ABMedia.