The Solana network is about to reach a major milestone: its market capitalization all-time high (ATH) is approaching the $80 billion mark. However, this achievement may be overshadowed by an underlying concern that is not attracting much attention: the supply of SOL tokens has inflated from about 300 million to 443 million since the last bull market. This increase in supply may have far-reaching implications for the token’s value and investor sentiment.
The Solana network is about to reach a major milestone: its market capitalization all-time high (ATH) is approaching the $80 billion mark. However, this achievement may be overshadowed by an underlying concern that is not attracting much attention: the supply of SOL tokens has inflated from about 300 million to 443 million since the last bull market. This increase in supply may have far-reaching implications for the token’s value and investor sentiment.
When the supply of a cryptocurrency increases significantly without a commensurate increase in demand, it can lead to dilution of the token’s value. For long-term SOL holders, this inflation of circulating supply means that their share of the network’s market capitalization has decreased. It is similar to a company issuing more shares; The value of existing shares tends to fall unless the market valuation of the company increases proportionately.
Looking at the Solana price chart, we observe a strong bullish trend. SOL price has been rising steadily and has consistently found support in its moving averages, which are well aligned and upward sloping, a bullish indicator. In particular, the 50-day moving average has acted as support for the price, aiding its upward trajectory.
Recent price candles show an accelerated pace in SOL value appreciation, hinting at bullish market sentiment. However, rising volume bars accompanying rising prices could be a double-edged sword: while they indicate strong buying interest, they also raise concerns about possible overbought conditions, especially as the Relative Strength Index (RSI) tends towards overbought territory.
As of the last candle on the chart, SOL is trading just below the $170 mark. While this points to strong near-term momentum, investors should be wary of potential pullbacks, given the RSI levels and the higher token offering in the market. If the market begins to factor in the diluting effects of inflated supply, bullish momentum could wane, leading to price corrections.
