Solana, a leading cryptocurrency for digital asset investors, jumped through the $200 resistance level on Thursday, trading 8% higher within 24 hrs as the market bounced back.
This upward trend positions the sixth biggest digital currency by market capitalization just a whisker below its high of $263, attained in November 2024. However, market analysts explain that a major resistance level may be seen in the coming months due to Grayscale’s unlocking activities.
Ben Lilly from Jarvis Labs notes several dangers associated with what has been referred to as the Grayscale Effect. Lately, in a Twitter post, Lilly stated that Solana’s token will face significant selling pressure once Grayscale unlocks more tokens held in its fund.
P.P.S
Again, these values are small relative to the size of Solana. This Grayscale Effect is nothing compared to Bitcoin.. So I don't expect any carnage, so calm down SOL bears / ETH maxis.
Just local tops and premium smashing to happen.
You can see how small these lots are,… pic.twitter.com/lsMtag5I6g
— Ben Lilly (@MrBenLilly) December 31, 2024
Grayscale has one of the longest lock-in periods, during which the company owns the assets for at least a year. Two significant unlocking periods are approaching: January 24 to February 2 and July 24 to August 7 only. Lilly added that these occurrences could replicate an effect in the market.
Grayscale’s Solana Strategy Mirrors Bitcoin Trust’s Past Volatility
The way how Grayscale’s trusts work has been witnessed earlier specifically with the Grayscale Bitcoin Trust (GBTC). At one time, each GBTC share was priced above the set Bitcoin price and spurred active market upswings.
However, when the premium was no longer there, declines occurred, depriving markets of boom times and triggering the failure of companies such as Three Arrows Capital, BlockFi, Celsius, and Voyager in 2021.
What Lilly wants investors to learn from this is that Grayscale’s handling of Solana could result in the same price swings. Data of past years of 2024 demonstrate that large unlocks notably affect SOL’s price representing a basket of cryptocurrencies. For instance, SOL token private sales in the last ten days of July 2024 saw the token price drop by as much as 40% despite demand ramping up.
As to the December 15th, 2023 unlocks, Lilly supposes that holders will be attracted to sell off their tokens soon after the unlocks in January 2025. This could saturate the market, making it difficult for SOL to apply pressure to reduce the price of SOL.
Solana is lucky to have such experts who encourage holders to sell their tokens before the 24 January 2022 unlock date, pointing to the same time when the asset’s direction may change.
In general, we would like to draw your attention to the fact that even though the Solana Grayscale Trust is only a small marginal in SOL, history shows that even such small unlocks, as a rule, create certain market responses. However significant this impact might not be horrendous, it will leave a short-term price effect and a cut in trading premium possible.
Now, Solana is $205, which is still 20+ percent down from its record-breaking $263 in November 2024. However, the upcoming unlocks present a problem to the asset’s price movement, notwithstanding the current growth. Lilly also points out that investors should remain wary as Grayscale is still actively affecting the crypto market.
Subsequent unlocking in Grayscale illustrates the structure of cryptocurrency markets and evaluates the importance of institutional approaches and investors’ behavior. The potential sell-off has yet to take shape, though Solana’s ability to ride out its impact will be a major test for one of the most recognized altcoins.
