Last week, the crypto community went wild after Solana skyrocketed by an impressive 30% to hit $46, only to plummet by 15% within 48 hours. Let’s break down on what happened to Solana with some in depth market analysis.
What Sparked Solana’s 30% Surge?
Our investigation leads us to an intriguing revelation. VanEck, a renowned ETF & Mutual Fund Manager, released a report on 27th October 2023 titled “VanEck’s Base, Bear, Bull Case: Solana Valuation by 2030”.
Let's take a look at a screenshot of VanEck's report below. In it, we see a bull case being presented of a 2030 price prediction of a jaw-dropping $3,211.28. The bear case presented in the same report shows a prediction of $9.81.
At the time of the article's release date, Solana was trading at $32. When a $76 billion-dollar fund management giant puts its weight behind a forecast of 100x potential upside, with a bear case of a 3x loss… it shows odds that are favourable to any investor.
Now this screenshot shows the text stating that the team owns SOL tokens and stakes in other Solana-based applications such as Hive mapper, Helium and Render. These are long side and bullish investments.
Living under the assumption that the news is what triggered the recent bull run, let's look for further evidence. Charts should provide the proof we're after.
Now taking a look at where most of the market volume trades, we can see the most liquid Solana pairs are on Binance and Coinbase. Let's look at the corresponding charts.
Now adjusting for time zone differences on the Coinbase charts, the timestamps suggest that the news was released conveniently on a day when the market trading volume was low on 27th October, US time zone.
If I ran a billion dollar fund and I wanted others to 'follow on trade' using my investment report, I would choose a low liquidity day as it requires less money to move the prices more. Coincidence or good timing? I'll let you decide. These guys seem to know what they're doing.
In the week leading up to the news announcement, we saw a lot of buying activity. Again, coincidence? I'll let you decide. (I think it's them!)
Over on Binance, the same story with large buy orders taking place in the days and weeks leading up to VanEck's report release date.
Corresponding low liquidity moment to release the report.
Now given the size of the fund, it would be wise to contact the media to share the story, what we see in the date stamps is a wide variety of crypto related news outlets in the following days share the news widely amongst its audience of crypto followers. What we see is buying activity highly corelated to the date and time stamps of each media outlet's coverage of the bullish news.
Now you might be thinking I've made some assumptions above. But bear with me, let's take a look at VanEck's website in more detail and pair that with our knowledge of how the asset management industry works.
Conveniently by VanEck's own admission, it holds $1/2 billion USD in digital assets. Now for a fund that size, and given how bullish the report was, it is a safe assumption to make that the fund manager would allocate up to a minimum of 10% of the portfolio's value in Solana. Today it has the 5th largest market cap of the entire crypto industry (not counting stablecoins - I'm sure VanEck with that much AUM would buy treasury bills and bonds instead of stablecoins).
If we take a conservative assumption that the fund manager only allocates 5% of the $1/2 bn portfolio to SOL, that's a $25million position, which does correlate to the increase in buy side activity in the market in the week before the report's release. (again assuming they didn't already start buying before). With the amounts they manage, the whale in the market is easier to spot. (I personally think they bought at least $50 million of SOL).
In my opinion, the fund's likely entry point was 15th October starting at $22/SOL with over $4million in buy orders executed on Binance that day.
The more I look, the more evidence I find of activity that correlates to VanEck being the whales behind the recent run, in the interest of getting some sleep, I'll leave some additional pointers:
- Additional avenue's of investigation is to look up TVL (total value locked) in the project's mentioned Hive mapper, Helium and Render.
- Other avenues to pursue are on-chain analysis, the amounts VanEck would trade will be very obvious with Total Value Locked analysis tools and DeFi explorers (also, shameless plug... as can be seen on DefiDive's DEFI page under the Solana category)
What caused Solana's token to fall 15%?
After Solana rallied to hit a 14-month high at $46, in our observation, the pull back is led by retail and institutional investors selling off their holdings.
The FTX extate sits on a large amount of Solana and on-chain analytics indicate a transfer of $42mil of their holdings in the past 24 hours in order to sell. The pump might present an opportunity for exit liquidity for some.
(Source: https://twitter.com/lookonchain/status/1720278473502327210)
Also, Solana's TVL remains low at $409mil compared to 9.8billion back in November 2021. It shows that their ecosystem has fallen behind despite their large market cap.
(Source: https://defillama.com/chain/Solana?currency=USD)
They have dropped out of the top 5 in terms of TVL with other Layer 1 chains like BSC and Arbitrum having TVL of over 1 billion USD.
Based on the 7-days Liquidation Levels Heatmap, SOL has huge liquidity pools at $40 and $35. A pull back is necessary and we expect to see $35 in the days and weeks to come.
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