On Thursday, as the broader cryptocurrency market showed signs of recovery, Solana (SOL) was one of the frontrunners. Altcoinscrossed the $200 mark, which represents an increase of 8% in the last 24 hours.
This upward momentum brings the sixth-largest digital currency by market capitalization close to a November 2024 all-time high. However, market experts warn that Solana may face significant pressure in the coming days.
A double-edged sword for Solana investors
Ben Lilley, a market analyst at Jarvis Labs, recently highlighted the potential risks associated with the “greyscale effect.” in one Social media postHe warned that the upcoming reopening of Grayscale SOL tokens could put significant selling pressure on the altcoin.
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Grayscale, a leading digital asset management company, has a policy to protect assets for 12 months after purchase. With the two main reopening periods approaching – January 24 to February 2 and July 24 to August 7 – Lilly warns that investors should be vigilant.
The mechanics of Grayscale Trust are similar to those seen in the past with Grayscale Bitcoin Trust (GBTC). In this case, investors buy Bitcoin (BTC) through Grayscale, which holds the assets for a period before issuing shares.
This created a premium where the stock was trading at a higher price than the actual price of Bitcoin, leading to a significant increase in the market.
However, when the premium disappeared, it signaled a market peak in 2021, leading to a string of failures for companies such as Three Arrows Capital, BlockFi, Celsius and Voyager.
Possible price reduction for SOL price
Lily points out that Grayscale is now implementing a strategy comparable to Solana, and future unlocks could mirror the past. Fluctuations It is seen in the crypto market.
The analyst notes that previous large purchases of SOL tokens saw private locks open from late July 2024, during which the price dropped by 40% in just ten days.
The concern is that the same trend may emerge as January 2025 unlocks, potentially leading to a significant selloff. This analysis suggests that when investors who have benefited from premiums in the past sell their holdings, they may flood the market and put downward pressure on the market. The price of SOL.
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Lilly recommends that Solana owners consider selling before the January 24 reopening date, as this could be a significant milestone for the property.
While Grayscale Trust for Solana is relatively small compared to the overall SOL market, the potential impact on price cannot be ignored.
According to Lilly's analysis, historical trends show that even small unlocks can have a significant impact market behavior. He assures that while the upcoming selling pressure may not result in catastrophic losses, it could lead to local price increases and premium reductions.
At the time of writing, SOL is trading at $205, down just over 20% from its peak of $263 on November 24 last year.
Featured image of DALL-E, chart from TradingView.com
