Solana Financial Report Discussion: Is it a real loss or a misunderstanding caused by data dimensions?

Little Bear Biscuit.eth

$SOL may face big issues, $90 is not the bottom, don't try to catch the falling knife!!! Did everyone know that Jump cleared its Solana token positions during yesterday's crash? The once-thriving Solana chain has a bright future, so why would such a powerful high-frequency quant institution like Jump choose to liquidate???

The $SOL tokens cleared went into the wallets of retail investors like you and me, and we handed our stablecoins to Jump. At such a low price, when else would we catch the falling knife? Who is the real fool here? Today, Little Bear Biscuit tells everyone the shocking truth: it will be very difficult for $SOL to return to $200. My judgment is based on public data:

Solana lost $1.8 billion in just the first half of the year, and the losses are accelerating.
Solana's unlimited issuance has increased by 161 million tokens in three years, allowing institutions to cash out wildly.

Financial Data

Solana has been losing money every quarter: from a loss of $160 million, $370 million, $840 million, to a loss of $950 million in just three months in Q2 of this year! The rate of loss is accelerating and shows no signs of stopping!

Has anyone told you these shocking figures? Retail investors, wake up and be cautious!

Unlimited Issuance

Since August 2023, the issuance of SOL tokens has increased by 60 million, which, at the current price of $140 per token, amounts to a market sell-off of $8.4 billion, all of which we have absorbed. In October 2021, the total supply of SOL was only 301 million tokens, and three years later it is 462 million tokens, which is an annual increase of 15%. With such a high inflation rate, do you still dare to catch the falling knife?

In this bull market of 2024, VCs are laughing and counting their money while on vacation. Only retail investors are still fantasizing that SOL will return to $200. I hope this article can help everyone have an independent, objective, calm, and clear understanding. Wishing everyone fewer pitfalls and more profits!

Data Sources:

@ Coin98 Analytics' Solana financial report released in July

@ MessariCrypto's token issuance data

Sun and Moon Xiao Chu

Another case of incorrect data analysis leading to erroneous conclusions.

Many people are optimistic about SOL, and this article has caused a lot of anxiety. So many people have privately messaged me about this issue. I will write some answers in this article.

First of all, I have no disrespect towards the original author; on the contrary, I am willing to selflessly share high-quality KOLs worth everyone's praise. The error in data analysis here is because the data dimensions are very easy to misinterpret.

Let me first talk about inflation. The author of the article cited data from Messari, pointing out that SOL issued 60 million tokens last year, worth $8.4 billion, into the market. However, the newly added circulation is not entirely due to the issuance of the SOL network. First of all, Messari's screenshot clearly states that it is new circulation; secondly, in my red screenshot, you can see a step-like increase, and such an increase cannot happen at the same speed.

The new circulation includes not only the network's issuance but also the unlocked portions. Since the institutions and teams of SOL have already unlocked everything, what is currently being unlocked should be from the foundation or ecological fund. This portion of tokens is often just unlocked but will not circulate because the foundation cannot freely use this portion of SOL.

What we are concerned about is inflation, which has already been stated in the official documents: now in the fifth year of Solana's launch, the annual inflation rate is 3.5%, and it will decrease by 15% each year. For comparison, in 2020, ETH's inflation rate was 4.5%, with a market value between $20 billion and $70 billion.

Therefore, SOL's inflation is not a significant issue. Historically, issuance during a rising market does not have a major impact on the token price because many people will continue to hold their tokens. Reasonable inflation will not hinder the price increase, and similarly, deflation cannot trigger a price increase (like ETH).

The second point raised by the original author is that SOL has huge losses that are rapidly expanding. From the financial statements, we see losses of $160 million, $370 million, $840 million, and $950 million in Q2 of this year.

In reality, this does not indicate that losses are increasing. This is merely a data illusion caused by dollar valuation. Nothing has actually happened.

Because the expenditures here include daily operations and payments to nodes in SOL (which is the network's issuance discussed earlier), and the latter accounts for a large portion.

Let's do a simple calculation: the average price of SOL in Q2 of 2023 was around $25, and the price in Q4 fluctuated significantly due to market manipulation, so we'll calculate it at an average price of $50. This year, in Q2, we can estimate it at around $160. I roughly calculated that SOL's quarterly issuance is 6 million tokens. So simply multiplying, in Q2 of 2023, it was $150 million, in Q4 it was $300 million, and in Q2 of this year, it was $960 million.

(Of course, if you think the inflation in dollar valuation is continuously expanding, you can refer to the earlier discussion about inflation.)

At this point, everyone should understand that the financial statements appear to show huge losses rapidly expanding, but this is just a data illusion caused by the rise in SOL's price. In reality, nothing has happened, nothing has happened, nothing has happened.

Alright, let's continue the music and dance.

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