Author: Bear Biscuits.eth, Riyue Xiaochu, Crypto KOL

 

Editor's note: Recently, crypto KOL Bear Biscuit.eth published an article on the X platform saying that Solana may face major risks and that the price of SOL will hardly return to $200. The article pointed out the continuous quarterly losses and unlimited issuance of SOL exposed in Solana's financial report. The article caused a lot of retail investors to have FUD about SOL. Last night, crypto KOL Riyue Xiaochu refuted Bear Biscuit.eth's view. He believed that SOL's inflation was within a reasonable range and would not hinder the rise in the price of the currency, and the loss was just a data illusion caused by the dollar denominated price. This article reproduces the articles of the two KOLs as follows:

This article is for readers' reference only and is not intended as investment advice. Please DYOR.

Bear Cookies.eth

Something big might happen to $SOL. 90U is not the bottom. Don’t buy at the bottom!!! Jump liquidated its Solana token position when the market plummeted yesterday. Did everyone know that? The Solana chain, which is in its heyday, has a bright future. Why would such a powerful high-frequency quantitative institution like Jump choose to liquidate its position? ? ?

The $SOL tokens that were cleared went into the wallets of you and me, and we gave the stablecoins to Jump. At such a low price, when else would we buy the dip? Who is the idiot? Today, I, Xiao Biscuit, will tell you the shocking truth: it is difficult for $SOL to return to 200. The information I used to make this judgment comes from public data:

Solana lost $1.8 billion in the first half of the year alone, and the losses are accelerating
Solana has unlimited additional issuance, with 161 million additional issuances in three years, and institutions are cashing out crazily

Financial Data

Solana has been losing money every quarter: from 160 million, 370 million, 840 million, to the second quarter of this year, it lost 950 million in just 3 months! The loss is still accelerating and there is no way to stop it!

Has anyone told you these amazing statistics? Wake up, leeks, and be cautious when buying!

Unlimited issuance

Since August 2023, the supply of SOL tokens has increased by 60 million. At the current price of 140U/coin, it is equivalent to selling 8.4 billion US dollars to the market, all of which we have taken. In October 2021, the total supply of SOL was only 301 million, and three years later it was 462 million. This is an annual increase of 15%. With such a high inflation rate, do you still dare to take over?

Data source:

Solana’s July financial report from @Coin98 Analytics

@MessariCrypto’s token issuance data

Sun and Moon Xiao Chu

This is another case of incorrect analysis of data, leading to incorrect conclusions.

Many people are optimistic about SOL, and this article has made people panic. So many people have privately chatted about this issue. So I wrote some answers into an article.

First of all, I have no intention of disrespecting the original author of the article. On the contrary, the KOL who is willing to selflessly share high-quality content deserves praise. The error in data analysis here is because the data dimension itself is very easy to be misunderstood.

1 Let me first talk about inflation. In the article, the author cited data from Messari, pointing out that SOL issued 60 million more coins last year, worth 8.4 billion, and dumped them into the market. However, in fact, this newly added circulation is not entirely an increase in the SOL network. First of all, the Messari screenshot shows the newly added circulation. Secondly, in my red screenshot, you can see a step-by-step increase, and the increase must increase at the same speed. This kind of increase is impossible.

Newly added circulation includes not only the network’s additional issuance, but also the unlocked part. Since the SOL institutions and teams have already unlocked all of them, the unlocked part now should be the foundation or the ecological fund. This part of the chips is often only unlocked, but will not be circulated. Because the foundation cannot arbitrarily use this part of SOL.

What we are concerned about is inflation. In fact, it has been given in the official documents that Solana is now in its fifth year of launch, with an annual inflation of 3.5%, and inflation will decrease by 15% every year. In comparison, the inflation rate of ETH in 2020 was 4.5%, and the market value of ETH at that time was between 20 billion and 70 billion US dollars.

Therefore, SOL inflation is not a big problem. Historically, additional issuance does not have a big impact on the price of the currency in an upward market, because many people will continue to hold the currency. Reasonable inflation will not hinder the rise in the price of the currency. Similarly, deflation cannot cause the price of the currency to rise (such as ETH).

2 The second point raised by the original author is that SOL has suffered huge losses and is rapidly expanding. From the financial statements, we can see that in Q2 of 2023, the losses started at 160 million, 370 million, 840 million, and reached 950 million in Q2 of this year.

In reality, it is not that losses are increasing. But it is just an illusion of data due to the use of US dollars. Nothing is actually happening.

Because the expenses here include daily operations and SOL paid to nodes (that is, the network issuance discussed in the previous section), and the latter accounts for a large proportion.

Let's do a simple calculation. The average price of SOL in Q2 of 2023 was around $25. The price in Q4 was quite large due to the pull-up, so we calculated it based on the average price of $50. This year, Q2 was basically around $160. I roughly calculated that SOL will issue 6 million more coins per quarter. So simply multiplying, it was $150 million in Q2 of 2023, $300 million in Q4, and $960 million in Q2 of this year.

(Of course, if you think the value of inflation in US dollars is expanding, you can refer to the previous discussion on inflation.)

Seeing this, everyone should understand that the financial statements seem to show that the huge losses are expanding rapidly, but this is just a data illusion caused by the rise in SOL coin prices. In fact, nothing happened, nothing happened, nothing happened.

All right, let’s continue the music and dancing.