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On Thursday, as the broader cryptocurrency market showed signs of recovery, Solana (SOL), another leading altcoinspassed the $200 mark, representing an 8% increase in the last 24 hours.
This upward momentum brings the sixth largest cryptocurrency by market capitalization close to the all-time high reached in November 2024. However, market experts warn that Solana may face more pressure in the coming days.
A Double Edged Sword for Solana Investors
Ben Lilly, a market analyst at Jarvis Labs, recently highlighted a potential risk associated with the “Grayscale Effect.” In a social media postswarned that the upcoming opening of Greyscale SOL tokens could cause significant selling pressure on the altcoin.
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Grayscale, a popular digital asset management company, implements an asset protection policy for 12 months after acquisition. With two major opening periods just around the corner—January 24 to February 2 and July 24 to August 7—Lilly warns that investors should remain vigilant.
The mechanics of Grayscale Trust are similar to those seen in the past with Grayscale Bitcoin Trust (GBTC). If so, investors would buy Bitcoin (BTC) via Grayscale, which can hold assets for a while before issuing shares.
This creates a premium, where shares trade at a higher price than the actual value of Bitcoin, leading to significant market rallies.
However, when that premium disappeared, it marked a market peak in 2021, leading to the failure of companies such as Three Arrows Capital, BlockFi, Celsius, and Voyager.
Potential Price Decreases in SOL Price
Lilly points out that Grayscale is now using a strategy comparable to Solana, and the upcoming opening could mirror the past. to waver seen in the crypto market.
The analyst notes that previous large purchases of SOL tokens saw a private placement open from late July 2024, when the price dropped by 40% in just ten days.
The concern is that the same could happen with the January 2025 opening, which could lead to a huge sell-off. The analysis suggests that when investors who benefited from the premium in the past sell their holdings, they may flood the market, putting downward pressure on the market. The price of SOL.
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Lilly recommends that Solana owners consider selling before the opening date of January 24, as this may mark a significant turning point for the property.
Although Solana’s Grayscale Trust is small compared to SOL’s overall market value, the potential impact on value is negligible.
According to Lilly’s analysis, historical trends show that even a small opening can have a big impact market behavior. He asserts that while the coming sales pressure may not lead to catastrophic losses, it may result in higher localities and lower premiums.
As of this writing, SOL is valued at $205, down slightly more than 20% from the $263 reached on November 24 last year.
Featured image from DALL-E, chart from TradingView.com