Is This the Start of a Solana Gold Rush?

There's reason to believe that Solana (CRYPTO: SOL) is getting its own cohort of persistent buyers that will put upward pressure on its price for years to come. During the 30-day period ended on Oct. 10, dedicated Solana digital asset treasury companies accumulated roughly 6.3 million Solana coins, or more than 1.6% of the circulating supply, and representing more than half of all the coins held in corporate treasuries, which totals 2.5% of its supply.

What's more, this is happening just as U.S. regulators cleared the first Solana exchange-traded fund (ETF), introducing asset managers and retirement accounts as two new big groups of buyers.

With so many new buyers rushing in, it almost looks as if there's a bit of a gold rush for the coin starting to pick up speed. Let's examine this trend in closer detail and investigate what it means for holders and potential buyers.

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Corporate treasuries are soaking up supply faster than expected

Crypto treasury businesses are public companies that raise capital primarily to buy and hold crypto on their own balance sheets, offering shareholders a way to get leveraged exposure to the underlying coin. That business model can concentrate ownership quickly into the hands of those players when sentiment turns bullish. It can also generate some hype on its own, as the purchases made by digital asset treasurers tend to be large.

In Solana's case, the recent pace of accumulation by treasury companies is striking because of how much of the coin's supply outstanding they were able to procure in such a short time. The asset's float available for public trading is 546.6 million, making the 6.3 million figure fairly meaningful considering that it essentially only took 30 days of buying activity by a few big fish. And there still might be more treasury businesses that launch and seek to buy Solana, as well as additional capital raises by the existing competitors to finance new purchases. So it's reasonable to expect that more buying is on the way.

Why does that matter? Prices are determined at the margin, and when there's a smaller proportion of the circulating supply that's available to purchase by virtue of coins being locked away in treasuries, it makes buyers compete with each other, often keeping prices higher. In other words, the more Solana coins that migrate onto balance sheets designed to hold through market cycles without selling, the thinner the readily available float becomes, and buyers must bid higher to coax long-term holders to part with their coins, which is a dynamic that can compound if buying persists.

Therefore sustained accumulation of Solana by digital asset treasury companies tightens supply for everyone else, and it's happening quickly.

ETFs will constrain supply even more, and soon

Corporate treasurers can bring a lot of capital to bear, but so can the asset managers who want to issue ETFs holding Solana.

ETFs are a key vector for capital inflows because they industrialize demand. Once an ETF is approved and listed, authorized participants (asset managers) can create new shares by delivering the crypto, which requires buying coins on crypto exchanges or elsewhere. That buying can steadily remove supply from the open market, as creating new ETF shares requires buying more coins to back them with.

On that note, the first U.S. Solana ETF, sponsored by 21Shares, received an approval from the Securities and Exchange Commission on Oct. 17. Other Solana ETFs are pending approval, and are almost certainly going to be on the way before the end of this year.

Assuming that investors actually buy the ETFs -- which is likely over the long run, but uncertain in the period immediately following the approval -- they could function as a second force pulling Solana coins out of circulation alongside its accumulation in corporate treasuries. The asset managers making bulk purchases on the open market are also likely to favorably affect the coin's price directly.

So what should investors do, assuming the new groups of moneyed buyers end up driving up Solana's price as they do their best to gobble up more and more of the supply outstanding?

Getting in on the action is the best approach. Buying either the Solana ETF or holding the coin directly in a crypto wallet will ensure that you get exposure. But to squeeze the most profit out of an investment, it will be necessary to retain your coins for at least a few years; the large sums of capital that are set to flow in are not under any obligation to do so quickly, though in practice they tend to.

Lastly, if this is indeed the start of a gold rush for Solana, take note that it's being driven by buyers who tend to keep what they dig up. If you don't hold on to your coins over the same long-term time frame, you're leaving at least a few nuggets behind.

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