VanEck Predicts Solana Growth and Price Surge to $520 by End of 2025
Solana, a leading smart contract platform, is on the brink of significant growth, with investment firm VanEck forecasting a notable increase in its market cap by the end of 2025. Currently, Solana holds a 15% share of the smart contract platform (SCP) market cap, but according to VanEck, this could expand to 22%, potentially pushing the price of SOL to an impressive $520. This optimistic prediction is based on several key factors including an increase in developer activity, enhanced decentralized exchange volumes, and a growing active user base.
VanEck's analysis uses a valuation model that correlates Solana's market share with the growth of the U.S. M2 money supply, which includes cash, checking deposits, and short-term investments. With the M2 money supply expected to grow to $22.3 trillion by the end of 2025 at a 3.2% annual rate, the total SCP market capitalization is projected to reach $1.1 trillion, overtaking its previous peak from 2021. Using an autoregressive model, VanEck estimates Solana's market cap could hit around $250 billion, which, with approximately 486 million floating tokens, would value each SOL at $520.
Scaling Revenue
Solana's prominence in the blockchain space is further solidified by its leadership in key metrics as of January 2024, such as a 45% share in DEX volumes, 45% in chain revenues, and 33% in daily active wallets. If current trends hold, VanEck predicts Solana could see an annualized revenue of $6 billion. This revenue is derived from base fees, priority fees, and maximal extractable value (MEV). Base fees, which are the minimum cost for network usage, contributed just 1% of January's revenue, while priority fees, which users pay for faster transaction processing, made up 43%. However, it's the MEV that forms the bulk of Solana's revenue at 56%, where block builders optimize transaction execution for profit.
The potential for revenue growth is even greater if Solana can optimize its MEV capture. Currently, block builders take 60% of MEV, while validators get 40%. If validators could secure 80% as seen in Ethereum, this could boost MEV-derived revenue significantly, potentially increasing validator revenue by 56%. Enhancements like the implementation of the Firedancer validator client could play crucial roles here. However, challenges remain, such as the inefficiencies from private memory pools and insider advantages, which VanEck suggests could be addressed through various strategic improvements like validator whitelists and application-level protections against front-running.
The growth in Solana's ecosystem extends beyond just financial metrics. The platform has seen a dramatic increase in dapp revenue, surpassing Ethereum in this aspect. In 2022, Ethereum dapps captured 84% of revenue while Solana had just 0.26%. By 2024, these figures shifted to 32% for Ethereum and 42% for Solana, with Solana's dapp revenue jumping from $4 million to $1.25 billion. This shift highlights Solana's growing appeal among developers, with an addition of 7,625 new developers in 2024 compared to Ethereum's 6,456.