A group of Solana enthusiasts is voicing their support for a new proposal (SIMD-0228) that promises a substantial decrease in inflation.
Ryan Watkins, a partner at Syncracy Capital, anticipates that this move will lead to an 80% cut in inflation for Solana.
“Expected reduction of 80% in inflation soon for SOL.”
Is Solana Overspending on Security?
The proposed Solana Improvement Document (SIMD)-0228 seeks to link the Solana issuance rate to staking engagement.
Vishal Kankani of MultiCoin Capital has raised concerns about Solana potentially ‘overspending on network security’ due to its fixed issuance rate compared to Ethereum. in his words,
“Currently, Solana introduces around 4.5% new tokens annually, decreasing by 15% each year. In contrast, Ethereum, with less than 30% staked, releases less than 1%.”
Kankani also noted that the current system hinders DeFi expansion.
“The high emissions from Solana not only drive prices down through increased selling pressure but also inflate staking rewards unnecessarily, which discourages participation in its expanding DeFi landscape.”
However, the proposed cut in staking rewards by almost 80% has faced opposition from certain community members.
Currently, stakers earn around 10% in rewards, a figure poised to decrease significantly under the new proposal.
Could SOL Plummet to $120?
Interestingly, the voting period follows closely on the heels of the unlocking of 11.2 million SOL from the FTX estate in March.
This large unlock on the 1st of March has exerted bearish pressure on the token, especially in the wake of the LIBRA memecoin controversy.
SOL has experienced a 53% drop from its all-time high of $295, falling below $140.
Nevertheless, Greg Magadini from Amberdata believes that the unlocking event was already factored into the market, and a broader market recovery could boost SOL’s value.
In a recent newsletter, Magadini remarked,
“It’s possible that a relief rally in SOL prices might result in a positive correlation between spot prices and volatility, especially since the market may be overly bearish.”
The prolonged decline of BTC to $86K has dampened market sentiment. Deribit reported that put options (bearish wagers) targeting $120 were the most popular in the past 24 hours.
These trends imply that SOL traders are bracing for further downside risks, possibly towards the $120 mark in the initial week of March.