There is a suspicion circulating that what is pushing Solana to surpass Ethereum are real crypto bots.
This hypothesis arises from research that explains how many of the transactions recorded on the Solana blockchain seem to be generated precisely by automated tools, and not by real-life people.
https://t.co/RAIZUwREKM
— Flip Research (@Flip_Research) July 30, 2024
Solana surpasses Ethereum: all thanks to crypto bots?
Just yesterday the news came out that Solana had beaten Ethereum in total weekly fees.
The previous week, another similar news had come out showing how the number of transactions recorded daily on the Solana blockchain had experienced a real surge, even though it had not yet returned to absolute highs.
The research published yesterday by Flip Research starts precisely from this data, and analyzes it to understand what caused this recent bull.
In particular, the analyst who drafted it states that the first suspicions emerged from the analysis of what seemed to be a supercycle of memecoin that appeared to allow Solana to surpass Ethereum as the main layer-1 crypto.
From his analysis, however, it would have emerged that these results are anything but worrying, so much so as to lead him to suspect that Solana could be a house of cards.
The conclusions
Flip Research claims that its analysis has revealed that some Solana metrics are significantly overvalued.
In fact, it argues that the vast majority of organic users are losing money on-chain at a decidedly rapid pace due to bad players.
According to Flip Research, the “supercycle of memecoins” is actually a kind of bubble artificially inflated thanks to the use of automated tools, and the current phase is that of a real mania in which retail inflows are still greater than outflows towards the bad and sophisticated players. However, when retail users inevitably get tired of giving funds to the bad players, many of these metrics should collapse quickly.
Furthermore, Solana would be facing a series of fundamental headwinds, which will concentrate when the sentiment changes.
The conclusion of Flip Research is that SOL is overvalued from a fundamental perspective and, although current sentiment and momentum may drive price increases in the short term, the long-term picture is much more uncertain.
The problem of on-chain data between Ethereum and Solana: metrics inflated by crypto bots?
The key point of this analysis is the on-chain transactions.
The idea is that a large part of the recent surge is not due to actual use by real users, but to automated tools (bots) that generate many transactions just to increase the metrics.
For example, on July 26, 1.3 million active addresses on Solana created an average of 217 transactions per address in a single day, while for example on Ethereum 376,300 active users recorded an average of only three daily transactions.
The data of Ethereum seem perfectly in line with those of the average behavior of people in flesh and blood, while those of Solana do not.
Moreover, Flip Research on Solana has also detected a high amount of MEV and wash trading.
It is worth noting that on the same days Solana also recorded the highest trading volumes on decentralized exchanges, surpassing Ethereum.
All this really makes one think that this enormous number of transactions and trading volume on DEX was generated by bots, and this raises doubts about the nature of what is happening within the Solana ecosystem.
The cause
According to Flip Research, the cause of all this would simply be an explosion of fraud attempts.
The “supercycle” of memecoin would be nothing more than a boom of “rug-pulled” projects based on low liquidity pools.
In fact, “rug-pulled” projects are a common type of exit scam that is becoming increasingly popular among fraudsters who want to exploit memecoins.
It should be remembered that in general memecoins are crypto projects without any value, and that they generate profits in the markets only for a short time before imploding. Cases where they last over time are very rare, as happened for example with Dogecoin, while in reality the vast majority of the many thousands of existing memecoins last for a very short time precisely because they are merely “rug-pulled” scams.
To this must be added that on DEX anyone can post a token, even if it is a blatant scam. Unfortunately, many retail users do not know these things, or they get enticed by the prospect of quick gains, which in the vast majority of cases they do not obtain.
The solution
At this moment, there does not seem to be a solution to the problem. The only thing that is advisable to do to minimize risk is to stay away from memecoins, particularly those on Solana.
Furthermore, the data analyzed by Flip Research shows how the bots on Solana have actually impacted the volumes throughout the year, and not just recently.
So it is not a circumscribed problem, but a long-standing one, and it also seems destined to persist over time, thanks to the fact that there are no filters on DEX.
It should not be forgotten that to pay the fees on all these transactions, one must use SOL, which is the native cryptocurrency of Solana. Therefore, this dynamic also drives the demand for SOL, with a positive impact on the price.
After the boom in February, the price of SOL had dropped below $130, but starting from early July it rose back above $180.
If, as Flip Research claims, it is a bubble, when it bursts even the price of SOL could be affected. It should be noted that the bullrun of the price of SOL started in October 2023, when the price was below $20.
