Solana Faces Potential Price Drop as Grayscale Effect Looms
On Thursday, Solana (SOL) experienced a significant surge in its price, crossing the $200 mark amidst a broader cryptocurrency market recovery. The altcoin, currently ranked as the sixth-largest cryptocurrency by market capitalization, saw an 8% increase over the past 24 hours, bringing it closer to its all-time high achieved in November 2024.
However, market experts are warning investors of potential challenges ahead for Solana. Ben Lilly, a market analyst at Jarvis Labs, recently highlighted the risks associated with the “Grayscale Effect.” He raised concerns about the upcoming unlocks of Grayscale SOL tokens, which could lead to substantial selling pressure on the altcoin.
A Double-Edged Sword For Solana Investors
Lilly pointed out that Grayscale, a prominent digital asset management company, enforces a 12-month lockup period for assets following acquisition. As the unlocking periods for SOL tokens approach—January 24 to February 2 and July 24 to August 7—investors are advised to remain vigilant.
The mechanics of the Grayscale Trust mirror previous patterns seen with the Grayscale Bitcoin Trust (GBTC). These patterns have led to market rallies and subsequent downturns when the premium associated with the trust disappears.
With a similar strategy being implemented for Solana, Lilly warns that investors should be prepared for potential volatility in the market. Past instances of large purchases of SOL tokens have resulted in significant price drops, indicating a possible sell-off following the upcoming unlocks in January 2025.
Potential Price Drop Ahead For SOL’s Price
Lilly advises Solana holders to consider selling before the January 24 unlock date to mitigate potential losses. While the Grayscale Trust’s impact on SOL’s overall market cap may seem small, historical trends suggest that even minor unlocks can influence market behavior significantly.
As of the latest data, SOL is priced at $205, down approximately 20% from its peak of $263 in November 2024. While the upcoming sell pressure may not result in catastrophic losses, it could lead to local tops and a decrease in premiums.
Investors are advised to stay informed and monitor the market closely as Solana navigates through a potentially turbulent period ahead.
Featured image from DALL-E, chart from TradingView.com