Solana Faces Pressure from High Inflation and Rising Token Supply

Solana (SOL) is under strain from high inflation rates, which are exacerbated by the ongoing release of new tokens and the absence of a supply cap.

Currently, SOL experiences annual inflation of over 5%, which is essential for incentivizing validators but also results in a growing token supply.

Still don’t understand people YOLOing into $SOL at the top as supply continues to increase and VCs continue to dump on them. Read the room bruh, find a 💎 that has a bright future but hasn’t had its run yet. pic.twitter.com/6ngAFd7fBh

— Alts Anonymous 🧐 🆙 (@Alts_Anonymous) August 4, 2024

The cryptocurrency’s performance is also influenced by concerns about venture capital firms potentially selling off large amounts of SOL, impacting its stability.

Despite some forecasts suggesting that SOL could reach $1,000, its large supply and current network performance limit its potential.

Compounding these issues, a rumored hidden wallet linked to FTX could contain 6 million SOL tokens, posing a risk if these are sold.

The network’s approach to subsidizing validator rewards further inflates the supply, with the total circulating supply of SOL growing significantly in recent months.

Currently priced around $121.26, down from a recent peak of $194, Solana faces ongoing market challenges and the pressure of a rising token supply, which could hinder its future performance.