Author: Riyue Xiaochu

Another case of incorrect analysis of data, leading to wrong 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, it is commendable that the KOL is willing to share high-quality content. 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 issuance of the network, but also the unlocked part. Since the institutions and teams of Sol 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 it is now the fifth year since Solana was launched, and the annual inflation is 3.5%, and the 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’s inflation is not a big problem. Historically, additional issuance does not have a big impact on the price of coins in an upward trend, because many people will continue to hold coins. Reasonable inflation will not hinder the rise in coin prices. Similarly, deflation cannot cause a rise in coin prices (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, as well as the sol paid to the nodes (that is, the issuance of the network 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 be issued 6 million pieces 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.

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

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