Solana's Supply Reduction Gamble: Can It End the 75% Plunge?

▲ Solana(SOL) ©

Despite Solana (SOL) improving its transaction processing performance and institutional adoption to an all-time high, it has fallen 75% from its peak, and the market's attention is now focused on a single vote to reduce its supply. Even with a cumulative $1.12 billion flowing into Solana spot ETFs and a validator client capable of processing over 1 million transactions per second activated, the price remained at $73.43.

According to investment media TradingNews on August 5 (local time), Solana traded at $73.43, up 0.17% over 24 hours, with an intraday range of $72.27 to $74.51. The price was below its 20-day exponential moving average (EMA) of $75.81, 50-day line of $76.27, 100-day line of $79.89, and 200-day line of $92.66. The 14-day Relative Strength Index (RSI) was also 43.05, not entering the oversold zone, indicating no clear signs of a rebound. To reverse the short-term trend, it must first recover to $75.81-$76.27 and then surpass the key breakthrough line of $79.89.

A governance proposal to address the supply issue suppressing the price has passed its first vote. Solana's annual inflation rate was designed to decrease by 15% each year from 8% at launch, reaching 1.5% in the long term. However, this proposal aims to double the disinflation rate. With a circulating supply of 582,979,450 SOL, reducing issuance could cut tens of millions of new tokens from the annual supply. However, validator rewards may decrease, affecting staking yields and network security, and final approval from validators who must accept reduced income is still pending.

Institutional funds flowed in, but this did not lead to a price increase. The cumulative net inflow into the five US Solana spot ETFs exceeded $1.12 billion, with assets under management totaling approximately $1 billion, resulting in an unrealized loss of about $120 million due to price depreciation. On August 4, the daily net inflow was only $1 million. Although about 30 institutions hold $540 million through ETFs, it is deemed insufficient to absorb the annual new issuance and venture capital unlocks. Forward Industries, a Solana-centric Digital Asset Treasury (DAT, a cryptocurrency treasury strategy firm), also acquired 6.9 million SOL at an average of approximately $145, currently facing an unrealized loss of about 49%.

Network performance contrasts with the price. The independent validator client Firedancer was introduced to the mainnet after recording over 1 million transactions per second in public load tests, and the network has operated without interruption for over 700 days. Processed transaction volume reached 33 billion in 2025 and 10.1 billion in Q1 2026. The Alpenglow upgrade, which will reduce transaction finality time to approximately 150 milliseconds, is also scheduled for late August. However, Total Value Locked (TVL) decreased by 52% from a peak of $11.5 billion to $5.5 billion, and the issue remains that increased usage does not sufficiently translate into token value due to low fees. The media suggested a basic range of $72.27-$79.89 for August and analyzed that a rebound to $92.66 could only occur if Bitcoin (BTC) maintains its bullish trend, the supply reduction proposal passes, and upgrades are implemented in conjunction.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*