Summary The election of President Trump has sparked a resurgence in digital assets, with Bitcoin and Ethereum rallying over 25% and meme coins nearly 100%. Solana is a major beneficiary in the meme coin bull market, thanks to its fast, inexpensive L1 blockchain network. I've been bearish on the Grayscale Solana Trust due to its excessive premium, recommending direct Solana purchases instead. Since July, Solana has surged 38%, while GSOL's NAV premium has plummeted from 750% to 138%, validating my recommendation. With private placement share lockups set to expire very shortly, time is running out to capture what is left of the secondary market premium on GSOL shares. With the recent election of President Donald Trump earlier this month, there has been an immediate resurgence in the digital asset market. Bitcoin ( BTC-USD ) hit a fresh all-time high at $93k per coin, Ethereum ( ETH-USD ) is back above $3k, and even Dogecoin ( DOGE-USD ) has gone on a monster rally. The latter of which has no doubt been fueled by Elon Musk's Department of Government Efficiency (or DOGE), to at least some degree. With respect to Bitcoin and some of the other large cap coins, the biggest post-election rally has come from the meme coins: Since the US Election (Artemis) In the days since the US election, BTC and ETH have each rallied by over 25%. Memecoins are up by just under 100%. The latter of which is likely not what 'fundamentally driven' digital asset investors would prefer to see, but it's the market we have. And in a bull market for meme coins, Solana ( SOL-USD ) is likely one of the biggest beneficiaries of that kind of activity as a L1 blockchain network that is fast and inexpensive to use. Solana's On-Chain Trends Data by YCharts To put it mildly, Solana has been an absolute powerhouse over the last 18 months. And that success hasn't come purely from coin price hype, there has been real progress in network usage to go with the 900% increase in SOL since May 2023. For a blockchain that looked like it was dead in the water two years ago, the resurgence of Solana as a network following the collapse of FTX in late 2022 has been absolutely incredible to watch unfold. October 2024 set a new all-time high in Solana's monthly network fees at $73.5 million. November is on pace to top that with $47 million before we're even at the midway point of the month. Fully Diluted P/F vs Network Fees (Token Terminal) These fees have grown so quickly that the fully diluted price-to-fee multiple for Solana is averaging 107x – this is the second lowest fully diluted SOL valuation ever, after the 104x P/F average in April 2024. Interestingly, the number of raw transactions on Solana doesn't appear to be the biggest reason for the fee spike. The primary driver of these fees has been a robust surge in monthly DEX volume, or decentralized exchange trading volume, going back to the beginning of the year: Monthly DEX Volume by Chain (Artemis) Solana did $52.5 billion in October DEX volume and is likely going to blow that figure out of the water in November, as the chain is already up to $49.8 billion through just half the month. While Solana has moved into the number 2 spot behind Ethereum in terms of Total Value Locked in DeFi protocols, this surge in activity is due to the proliferation of meme coins that are available on Solana. New memes pop up on a regular basis; including the apparently immortal " Peanut The Squirrel " (PNUT-USD) which has quickly catapulted to the 55th highest ranked cryptocurrency market capitalization after just 10 days of trading. Though silly from where I sit, these types of things are a big reason why Solana has had over 6 million active addresses in November. Daily Active Addresses (Monthly) (Artemis) Even when considering additional networks that have seen an explosion in usage recently like Sui ( SUI-USD ) and NEAR Protocol ( NEAR-USD ), neither have come close to Solana in the last two months from a DAA standpoint. In fact, Solana had a larger number of daily active addresses than Sui and NEAR combined in October and is on pace to do it again in November. For better or worse, Solana has become sort of the 'court jester' in the crypto market. While Bitcoiners HODL and 'ETH Maxis' wait for new highs as the chain scales through dozens of fragmented L2s, Solana is where the party is apparently at in the crypto ecosystem. I'm not sure that's a great reason to buy SOL, but I can't say it's necessarily a 'sell' either in a nihilistic world. Still, there's a wrong way to do everything, and buying Solana is no different. The GSOL Premium Is Melting Seeking Alpha There can be little doubt that I've been bearish about the Grayscale Solana Trust ( GSOL ) in 2024. On separate occasions over the last 8 months, I've labeled the fund a 'sell' and a 'strong sell.' The logic behind those calls has primarily been due to the elevated premium the fund shares traded at to the net asset value of the fund. Most recently, in July , GSOL shares traded at a 750% premium to the SOL represented by each share. At that time, I even cautioned against doing a private placement in the fund in an attempt to capture the post-lockup price premium due to the duration risk in doing so: For accredited investors considering a private placement, I would weigh the merits of simply buying Solana and staking for the 7% reward. This way the duration risk of the lockup period is eliminated, there is no risk of selling your shares below NAV on secondary, and you're not paying Grayscale's 2.5% management fee while the SOL sits dormant for 12 months. For investors who heeded that advice and simply bought Solana directly rather than playing around with GSOL private placement, the results likely speak for themselves: GSOL vs SOL 7/17-11/14 (Seeking Alpha) Since July 17th, Solana is up over 38% before staking rewards, while GSOL has lagged the entire time. More recently, shares have fallen apart as the NAV premium has collapsed from 750% down to just 145% as of market close on 11/14. It's certainly possible that buyers of this massive premium collapse of GSOL during November could ride the premium back up where it was before. But I don't think that's likely. Grayscale Fund Ticker 11/14/23 11/14/24 Change Bitcoin Cash Trust ( BCHG ) 34,812,900 44,478,400 27.8% Litecoin Trust ( LTCN ) 17,204,700 23,064,800 34.1% Filecoin Trust ( FILG ) 111,400 1,906,900 1611.8% Chainlink Trust ( GLNK ) 321,010 1,172,710 265.3% Solana GSOL 304,427 1,412,627 364.0% Source: Grayscale, shares outstanding Relative to a year ago, GSOL shares outstanding have grown by 364% - this is far more than most of the larger AUM Grayscale funds and only dwarfed by share growth in FILG going back to last November. And here's the biggest takeaway I'll leave GSOL holders with from this article; it looks like you're running out of time to capture what is left of your secondary premium: GSOL Shares Outstanding (Grayscale, Author's Chart) From late November 2022 to late November 29th, 2023, there were 340.5k GSOL shares outstanding. That number exploded overnight to 468.7k GSOL shares on November 30th, 2023. And as you can see in the chart above, the outstanding share growth really hasn't stopped since. It would appear GSOL holders have about 10 trading days left before these accredited investor share lockups begin to expire. Closing Summary At this point in time, I'm going to maintain GSOL as a 'sell' and reiterate Solana as a 'buy.' The emergence of fast, retail-driven blockchains like Sui and NEAR Protocol figure to chip into Solana's leading spot as heir to Ethereum's smart contract throne over time. But to this point, Solana is still the clear leader in memes and nonsense on the blockchain. I trade SOL fairly regularly, but generally keep a core long-term position. GSOL, on the other hand, should be avoided until it starts trading closer to NAV. At a NAV rate discount, it might even be a 'buy.' We'll find out soon enough.
