Solana (SOL) currently accounts for 15% of the smart contract platform (SCP) market capitalization, with projections indicating a rise to 22% by the end of 2025, which could push SOL’s price to $520, according to a recent report by VanEck.
Solana’s market cap expansion is driven by its strong developer presence, increasing share of decentralized exchange (DEX) volumes, rising revenue, and growing active user base.
VanEck’s valuation model ties Solana’s expected SCP market share to the U.S. M2 money supply growth, which has historically correlated with crypto market capitalization. M2 includes cash, checking deposits, and short-term investments and serves as a broad measure of money supply in the US and eurozone.
The M2 money supply is projected to reach $22.3 trillion by the end of 2025, maintaining a 3.2% annualized growth rate since October 2023.
Regression analysis suggests total SCP market capitalization will grow 43% to $1.1 trillion by the end of 2025, surpassing its 2021 peak of $989 billion.
Using an autoregressive (AR) model, VanEck estimated that Solana’s market capitalization could reach approximately $250 billion. With 486 million floating tokens, this implies a SOL price target of $520.
Scaling revenue
Solana has gained prominence among layer-1 blockchains, leading in DEX volumes (45% market share), chain revenues (45%), and daily active wallets (33%) as of January 2024.
VanEck projected that Solana’s expected revenue could reach an annualized rate of $6 billion if the current trend continues. The network’s revenue comes from three primary sources: base fees, priority fees, and maximal extractable value (MEV).
The base fees represent the minimum network usage cost and amounted to 1% of Solana’s January revenue. Meanwhile, the priority fees are tips users pay for faster transaction inclusion, totaling 43% of the network’s revenue.
MEV represented most of Solana’s revenue last month, as 56% was secured through fees earned by block builders optimizing transaction execution.
Boosting MEV
Solana’s MEV revenue structure allows block builders to capture 60% of MEV value, with validators retai
Go to Source to See Full Article
Author: Gino Matos
