Institutional Weekly #10 — Solana Becomes Forth Largest Cryptocurrency After a Year of 900%+ Return

Presenting you with weekly insights into what the crypto community is buzzing about!

Equities retreated slightly as major U.S. indices saw resistance after hitting ATHs, however cryptocurrency was in its own league. Bitcoin rebounded strongly after seeing support at the $42K level following the news that BlackRock met with the SEC, likely to discuss details in launching a spot Bitcoin ETF.

Weekly Macro Overview

In the past week, notable economic data releases were absent from the forefront. However, the optimism in the market, initially fueled by Jerome Powell's unexpectedly dovish remarks the preceding week, faced a setback as Federal Reserve officials tempered expectations of substantial rate cuts in 2024.

Looking ahead, stay tuned for our comprehensive 2023 macro events roundup in an upcoming article, where we will delve into the key economic developments of the year.

Token of the Week

The token of the week is SOL, the native token of the Solana network. The crypto rally which started in October brought SOL from $20 to $40. Thereafter, the conclusion of the FTX trial marked the beginning of another doubling in the token’s price. The market is attributing this stellar performance primarily to the de-pegging of Solana from FTX and to speculative airdrops from Solana’s network applications, including meme token BONK.

Regarding fundamentals, Solana’s TVL has surged above $1.2 billion, higher than before FTX’s collapse. That said, SOL was only at $30 as opposed to $113 at the time of this writing, pointing to the fact that there is no additional capital entering the Layer 1 network as most TVL increments result from price increments.

However, it seems that the new token accounts added to the network indicate Solana’s popularity among retail users.?

Altcoin Mania Brewing?

BONK has played a critical role in SOL’s surge, with the airdrop of the meme token distributed to the holders of Saga — Solana’s self-developed smartphone designated for web3 users, which incentivizes speculators to snap up Saga as the airdrop value of BONK likely exceeds the cost of owning a Saga.?

SOL’s 9x return in a year and BONK’s 3x return in a month pointed to a crypto bubble possibly forming. Meme tokens are widely perceived as tokens with no utility and price movements are not largely attributed to fundamental factors, such as future revenue generation and web2 adoption. Their price movement is more prone to speculation and may be subject to extreme volatility once mercenary capital starts to realize their profits.

Final Thoughts — Is SOL a blue chip token now?

Solana has essentially become the fourth largest cryptocurrency, trailing after BTC, ETH, and USDT. Since USDT is a stablecoin, SOL can essentially be considered one of the top 3 risk investments among all cryptocurrencies.?

So far, the industry has only perceived BTC and ETH to be the only two blue-chip assets. Where blue chip tokens enjoy a preferred status when it comes to institutional investors’ asset allocation. Bybit research indicates that around half of investors’ assets are invested in BTC and ETH, where altcoins (including SOL in our previous research) take up only 5% of their portfolio value collectively.? If SOL is indeed regarded as a blue chip now, it forms another tailwind to the token price with possibly more buying needs from institutions.

Determining SOL's status as a widely recognized blue-chip asset remains challenging, as institutional investors typically refrain from making drastic changes to their asset allocations within a single quarter. Bybit Research is committed to closely tracking the evolving asset allocations of institutional investors, providing valuable insights to guide you through both bullish and bearish market conditions.

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