Solana staking eats into the free supply as whales move in

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Solana (SOL) staking increased to peak levels, as whales move in to take more SOL from the market. Liquid staking has taken off for Solana, leading to a significant supply lockup. 

Solana (SOL) is becoming more scarce, despite the built-in inflation. As a utility token, SOL is valuable in the long term, and holders are in no hurry to sell. This has led to near-record levels of staking, which have taken up more than 68% of the SOL supply. 

Recently, new whale wallets withdrew SOL and added to the staking. The mix of native or liquid staking is helping to control the supply, despite the linear unlock of more than $5M daily. 

Also Read: Jupiter takes up to 80% of Solana priority fees from JupSOL

The increase in staking has also coincided with the planned slide in SOL inflation to under 5%, while also decreasing the supply in the past months. Native staking has been available for SOL, with competing validators for the best returns. Since May, staking is also possible through Robinhood, and open to eligible EU-based holders. 

But the real staking growth comes from the accelerating trend of Solana-based liquid staking. Solana now aims to repeat the success of Ethereum (ETH), where holders gain both staking rewards and access to liquid staking tokens. 

The boom of staking and liquid staking also coincides with a peak number of both new and active Solana wallets. The heightened activity on Solana helped the recent price rally, when SOL broke above $180. After this week’s correction, however, SOL dropped to $170.03. 

Current sentiment for SOL is cautiously bullish for both crowd and smart money. More bullish crypto influencers see SOL rallying to $250. 

Liquid staking grows on Solana, adds a diversity of protocols

Liquid staking on Solana now holds more than $4.31B in value locked, making the majority of DeFi protocols. Solana as a whole carries $5.15B in locked value, with the addition of DEX and lending protocols. 

But liquid staking was also the fastest-growing sector on Solana, staging another rally since late June. 

Liquid staking is also building an ecosystem similar to Ethereum. In addition to rewards for the staked SOL, users receive liquid staking tokens. Holding them makes them eligible for additional rewards or airdrops down the line. 

Also Read: Whales shift focus to ETH staking and Ethereum ecosystem tokens

For now, there is no clear answer about the final value of those airdrops. However, the boom in liquid staking is boosting SOL market prices, taking coins off the market and creating new sources of risk exposure. 

Liquid staking is becoming more competitive, though still spearheaded by JitoSOL, the protocol’s top validator. Recently, JitoSOL increased its holdings above $2B for the first time. 

At the current rate, Solana-based liquid staking is still catching up with top Ethereum liquid staking projects. At its peak, Eigen Layer locked in more than $22B in staked ETH.

Liquid staking is still slower than native staking, taking up around 6.71% of the supply. The small share of liquid staking compared to Ethereum (ETH) is seen as a sign of potential growth, as validators are now in a more heated competition. 

Liquid staking sparks validator wars

The recent inflows into JitoSOL also coincided with peak outflows from the INF validator. At the same time, Galaxy and Helius rose up the ranks of validators after adding liquid staking in the past few months. 

The most dramatic growth started for JupSOL, the validator of the Jupiter DEX aggregator. JupSOL carries the traffic of the Jupiter aggregator, while also offering liquid staking benefits. JupSOL is now the third biggest provider of liquid staking, with more than 9% of the tokens staked. 

Also Read: Solana Foundation expels 30+ validators for sandwich attacks

The leading validator, JitoSOL, carries more than 45% of SOL in its liquid staking protocol. As of July 15, JitoSOL also saw a record inflow, with more than 16K depositors. The JitoSOL validator also earns from tipping, a tool to ensure that transactions are included into a block and protected from MEV bots. More than 160K wallets issued tips, as otherwise even the best protocols have a large transaction failure rate. 

Liquid staking is highly popular, but contains higher risk compared to native staking, due to smart contract exposure. The current bullish expectation for SOL is also boosting the liquid staking and DeFi market.

Cryptopolitan reporting by Hristina Vasileva

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