Is the "Solana Summer" Finally Here?

Solana (CRYPTO: SOL) just did something it had never done before. In the week ending July 6, it cleared more than 1 billion non-vote transactions, and its count of weekly active wallet addresses jumped from 16.8 million to 29.7 million over just the prior two weeks.

That massive influx of users and activity is spurring some investors to wonder whether the chain's explosive "Solana Summer" of 2021 might return in 2026. If this really is another summertime surge for Solana, it won't be priced at its current discount for much longer.

The chain is having a moment, and more could be on the way

One big driver of this new flurry of activity on Solana is its quickly expanding base of tokenized assets, which currently totals around $3.3 billion. That's $1.1 billion more in value than it had as of May 9, and one segment is looking particularly good.

As of early June, Solana accounted for roughly 97% of on-chain tokenized stock trading volume. There's presently $318.7 million in tokenized stocks parked there, trailing Ethereum's $648.9 million in tokenized equity value. As long as asset managers are interested in tokenization as a means of trading and tracking their stocks, Solana will likely continue to take an incremental share of the new capital inflows from Ethereum, as its technical capabilities are a much better fit for the purpose.

An even bigger piece of news is the launch of Open USD (OUSD), a new consortium-backed stablecoin from more than 140 financial institutions, including many of the largest, like BlackRock, that's launching natively on Solana later this year. The syndicate picked Solana as its launch chain, and that means the network could have billions in capital inflows right around the corner.

The token is not the same as the chain

There is an unfortunate catch here, which might make Solana a poor investment this summer despite its recent strength.

Solana is inflationary by design, but only modestly so. Its transaction fees are largely distributed to stakers and validators, and a portion of every fee is burned (destroyed). But, because fees are so low on the network in general, only around 1% of the coin's new issuance is burned as a result of transaction activity. The bigger problem is that the rate of coin burning is so low as to be insignificant relative to the total supply; the implication is that holders should not expect much upside from on-chain activity alone.

Nonetheless, those tokenomics can be changed, and there have been some recent proposals in the Solana community to that end. It isn't worth buying the coin with the expectation that similar proposals will eventually pass and ameliorate the disconnect between on-chain activity and the returns holders get.

Still, all the signs of a strong summer for Solana are here. If its monthly network activity continues to trend upward and the OUSD launch brings the billions in capital inflows it's likely to, the coin will probably gain in value even if its tokenomics aren't very friendly to holders.

Alex Carchidi has positions in Ethereum and Solana. The Motley Fool has positions in and recommends BlackRock, Ethereum, and Solana. The Motley Fool has a disclosure policy.