Solana is making a less obvious Wall Street pitch: forget the token for a moment and look at what sits underneath the trade. Its new settlement system puts that infrastructure in focus.
The Solana price hovered around $120 on Oct. 6 as the Solana Foundation prepared an infrastructure product for financial institutions. The Solana network announced a new tool named Solana DvP that would allow settlement of tokenized assets and payments in a single transaction, instead of the usual chain of intermediaries.
It does not offer a fresh product for trading, nor does it create a new token. The key difference in this latest Solana news is that the network is targeting a much less conspicuous but critical aspect of financial transactions: the settlement.
Delivery-versus-payment, or DvP, is a common set of instructions in traditional markets: The buyer does not get the asset until the seller collects the funds, and vice versa. In on-chain transfers, this nuance can be embedded in an ‘atomic’ transaction that performs multiple actions at once.
The Solana Foundation has open-sourced its latest program under the MIT license and said the tool provided financial institutions with a standardized API for the process. This was informed partly by suggestions from J.P. Morgan about institutional needs in this area.
This reputation matters: J.P. Morgan is one of the most recognizable names in traditional finance, and its involvement suggests that the Solana Foundation sees this product as its most important offering to date. This product is different in that it is not about simply accelerating crypto transactions or reducing costs.
It is meant for the firms that are already well-established in traditional finance. Catherine Gu, Solana Foundation’s head of product for digital assets, said that atomic settlement eliminates counterparty risk that is common in traditional finance and offers an open standard with settlement finality in seconds, rather than days.
There is a wider context to this Solana news. Other Wall Street firms are also starting to see the value in the blockchain. BlackRock has introduced its tokenized money-market products on the network. Kraken has used the Solana infrastructure for its xStocks product, which essentially allows overseas investors to gain access to tokenized U.S. stocks. The Foundation’s latest tool very much fits the trend.
In general, a rise in products involving institutional players does not guarantee a sustained increase in demand for SOL. In crypto, any given blockchain can be used for an extended period of time before it sees a meaningful uptick in token holders.
The shift is apparent nonetheless: Solana is targeting financial firms to use its infrastructure for purposes beyond mere trading. Corporate treasuries appear to be one such driver: DeFi Development Corp. said it had increased its SOL holdings by 11% since Aug. 12. Its reserves amounted to 2.56 million SOL and SOL equivalents as of this writing, or about $302 million.
This application does not directly relate to a bank’s needs in tokenized bonds, but it is nevertheless part of the same storyline of rising institutional interest in Solana.
The Solana price has climbed alongside this resurgence in institutional interest. Application fees increased $639 million in the second quarter to $948 million in the third, representing an increase of about 48%. This is one of the more important metrics to follow, as it shows that network activity is accelerating.
There is one caveat to note: An increase in fees does not necessarily mean increased value for the SOL holders. Instead, application fees point more broadly to an increase in economic activity involving the blockchain. Its connections to the token are indirect at best.
For markets, nonetheless, it is an important sign: The network continues to generate more economic activity that traders can attribute to its growth.
The Solana price has remained comparatively stable in recent sessions, hovering around the $120 level. As a consequence, this is the immediate vicinity that traders will use as a reference point.
The token managed to peak at about $123.55 over the past week, while the lower end of that range was around $116.75. A sustained increase in prices would put the 128-132 region back into contention. And beyond it, $150 is still a round number that analysts have specifically highlighted in the last couple of weeks as the token broke higher.
At this point, $120 does the bulk of the work. Consequently, the next few sessions could be critical in determining the next immediate threshold to watch.
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