Is Solana’s economic model truly sustainable, or are the comparisons to Terra Luna valid?
- Justin Bons defended Solana’s economic design, dismissing comparisons to Terra Luna’s collapse. Despite bearish trends, MACD signaled potential bullish momentum for Solana’s price recovery.
Solana [SOL] fell 2.21% in the last 24 hours despite the crypto market upswing, with its global market cap reaching $2.07 trillion after a 0.65% rise.
However, there were some growing concerns over SOL’s economic framework.
Concerns surrounding Solana
Some critics drew parallels between Solana and Terra Luna, the blockchain project that collapsed in 2022.
These comparisons, however, have been dismissed by Cyber Capital founder and CIO Justin Bons, who deemed the concerns as exaggerated and unfounded.
In response to the growing rumors and concerns, Bons stated,
“Solana has an excellent economic design. With a long-term inflation rate of 1.5% combined with a 50% burn rate of the base fee. It is perfect, as tail inflation ensures long-term sustainability while the burn allows for scarcity. The fear-mongering around SOL’s economics is FUD!”
What’s more to it?
Bons explained that SOL’s economic design is traditional and follows the same principles as major blockchains like Bitcoin [BTC] and Ethereum [ETH].
He pointed out that during the early stages of many blockchains, including SOL, there is a phase of high inflation, which gradually decreases over time—a common and intentional strategy for many cryptocurrencies.
Bons highlights that Solana’s economic model mirrors Ethereum’s after its EIP-1559 upgrade, which introduced mechanisms to control inflation by burning transaction fees.
Is the Terra Luna comparison justified?
Bons believes Solana’s token economics are sound and not comparable to Terra Luna’s collapse.
He added,
“The only significant difference is that SOL is scalable, whereas ETH is not. According to my thesis, over the longer run, a scalable chain with low fees will be able to gather way more fee revenue anyway.”
In addressing the distribution concerns surrounding SOL tokens, Bons noted that Solana’s upcoming token unlocks are more beneficial compared to other emerging blockchains such as Aptos [APT], Sui [SUI], and Sei [SEI].
He said,
“These chains all have far bigger upcoming unlocks, and distributions are skewed far more towards insiders compared to SOL. So, the extreme narrative against SOL does not at all match the current reality.”
He concluded the argument by emphasizing his point when he said,
“SOL has an ideal economic design, & if you do not recognize that you are sticking your head in the sand!”
SOL’s price action explained
Amid these concerns, Solana’s price performance has been underwhelming, as confirmed by the RSI, which remains below the neutral level, indicating a bearish trend.
However, the MACD paints a slightly different picture, with the MACD line positioned above the signal line, suggesting that bullish momentum still lingers, offering some hope for recovery.
Source: Trading View
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