- Solana overtook ETH briefly this week in terms of staking market cap for the first time.
- The Solana network saw more than $53.9B worth of SOL staked on April 20.
- This could be bearish because many investors are choosing to stake their tokens, rather than deploy them in DeFi protocols.
Solana recently hit a major milestone, which has brought it some fresh attention across the crypto space. This network briefly overtook Ethereum in terms of staking market cap for the first time in its history. As it stands, this achievement isn’t just about numbers. It has raised some interesting questions related to blockchain security and the future of DeFi on both networks. Here’s what happened and what it means for the crypto community on both the Solana and Ethereum camps.
Solana’s Staking Surge By the Numbers
The Solana network hit this milepost on the 20th of April, where over $53.9 billion worth of SOL tokens were staked. This slightly edged out Ethereum’s $53.72 billion and saw the Solana network receive staked assets from more than 505,000 unique wallet holders.
Each of these Solana stakers was in line to earn about 8.31% on their staked assets, compared to Ethereum’s 34.7 million with returns of around 2.98%. One main reason that Solana was able to flip Ethereum was in its impressive price performance over the last two years.
According to data from TradingView, the SOL/ETH ratio rose nearly 10x since mid-2023. This has given Solana’s staked value a more serious boost, without even having to overtake Ethereum in token numbers.
A High Yield That Comes at a Cost?
At first glance, Solana’s 8.31% staking yield looks like a win for investors. However, critics have argued that this development might be too good. And they don’t mean this in a good way.
For starters, staking SOL offers such high “risk-free” returns compared to Ethereum. Because of this, many investors are choosing to stake their tokens rather than deploy them in DeFi protocols, which only offer 4–6% (compared to 8.3% on staking). As per JC, from Builda Protocol, this is somewhat bad news.
Via a tweet post, JC noted, “Solana having 65% of its market cap staked means there’s no other use of its token. It’s actually bearish.” In other words, if everyone is staking and no one is using the token for anything else, that makes $SOL basically useless. Therefore, its utility on a wider scale is bound to suffer.
When compared to Ethereum, where only 28% of the total supply is staked, this shows that there is a larger pool of ETH circulating in the DeFi ecosystem. This has been instrumental to Ethereum’s market dominance, with over $50B in TVL (compared to SOL’s relatively lower $8.85 billion).
Whales Are Watching and Acting
Institutional interest in Solana has been strong, though, amid these debates. Galaxy Digital withdrew 606k SOL tokens from exchanges over 4 days in April. Besides, 37,803 SOL tokens were unstaked by an unrelated whale from Binance.
Very recently, too, US-listed company Janover increased its SOL holdings to over 163,000 tokens and partnered with Kraken for staking services. These moves show that institutional demand for the Solana network’s services (and token) is growing. As of writing, SOL is trading around $140, and analysts are watching major price levels like $129 as major support and $144 as resistance. A break above either of these price levels could open the door to new highs (or new lows) over the coming weeks.
