VanEck's Bullish Outlook on Solana: A Deep Dive into the $335 Price Target

In a recent episode of the Lightspeed podcast, Matthew Sigel, head of crypto research, and Patrick Bush, senior investment analyst at VanEck, joined hosts to discuss their bullish outlook on Solana (SOL) and the broader cryptocurrency landscape. The conversation centered around VanEck's recent report predicting SOL to reach $335 by 2030, offering valuable insights into their investment philosophy and analysis of the crypto market.

VanEck's Journey into Crypto

VanEck, a traditional asset manager with about $80 billion in assets under management, has been at the forefront of embracing cryptocurrency investments. Matthew Sigel explained the firm's entry into the crypto space:

"We were the first TradFi firm to file for a spot Bitcoin ETF in 2017. When that couldn't get off the ground because of regulations, we pivoted and started investing into venture to get smarter in the space."

This pivot led VanEck to launch actively managed digital asset strategies in New York and several ETFs and ETNs in Europe, where regulations were more favorable. Notably, one of their first offerings was a Solana ETN in the summer of 2021, highlighting their early recognition of Solana's potential.

The Solana Bull Case

The discussion delved into VanEck's bullish stance on Solana, with Matthew Sigel drawing parallels between Solana's founder Anatoly Yakovenko's work and his own background in equity research:

"When I came across Solana in 2020, I kind of realized that what Anatoly was doing, optimizing the blockchain for the speed of the hardware, was something that was truly innovative and unique and could disrupt something like a NASDAQ."

This insight led to VanEck's investment in Solana and their continued bullish outlook on the project. The firm's recent report predicts a base case scenario of SOL reaching $335 by 2030, with a bull case target exceeding $13,000.

Valuing Smart Contract Platforms

When discussing how VanEck approaches valuing smart contract platforms like Solana and Ethereum, Matthew Sigel emphasized the importance of understanding the potential for disintermediation of the existing financial system:

"We basically look for a sufficient level of decentralization and open source code to give us conviction that we're investing in an open source project and not a private blockchain where personally I have zero interest."

This approach underscores VanEck's focus on truly decentralized and open-source blockchain projects, which they believe have the potential to reshape the financial landscape.

The 100 Million User Milestone

A key aspect of VanEck's bullish case for Solana is the potential for onboarding an application with 100 million users. Matthew Sigel explained:

"The experiment here was really to think about which is going to be the chain that onboards an app with 100 million users. Because of Solana's performance advantages, it is maybe the first and only chain to reach that 100 million users on a single app."

This milestone would represent a significant leap forward for blockchain adoption and could potentially catalyze a new wave of growth in the crypto ecosystem.

Solana's Monetization Strategy

Patrick Bush elaborated on how VanEck models Solana's potential for monetization:

"We tend to come at it is that Solana is similar to a platform like an Uber or an Amazon, Uber's economic activity on it. And then we some take rate on the activity based upon the end market."

By comparing Solana to successful platform businesses, VanEck aims to forecast the blockchain's potential revenue streams and value accrual mechanisms.

Local Fee Markets and Price Discrimination

The conversation touched on the concept of local fee markets, a potential development in Solana's ecosystem that could allow for more nuanced pricing of blockchain resources. Patrick Bush explained:

"Maybe there's a path for Solana can monetize things explicitly based on what they're being used for. So they don't really see an EDM that's not really possible. And this is because of the local fee markets design."

This approach could potentially allow Solana to implement more sophisticated pricing strategies, similar to how traditional businesses use price discrimination to maximize revenue.

Solana's Resilience Post-FTX

Patrick Bush highlighted a turning point in his perspective on Solana following the FTX collapse:

"When FTX happened, I started to felt validated because you think about like, okay, Solana doesn't have a lot of traction from users, TVL, developers, whatever standpoint. And in fact, those have shrunk over time. And even today, they're much, much lower than they were as percent eligible crypto. And I also saw FTX happen and it was like, okay, this thing is indeed hamburgers."

However, contrary to expectations, Solana not only survived but thrived in the aftermath of the FTX collapse. This resilience demonstrated the strength of Solana's ecosystem and technology, leading to a reevaluation of its potential.

Solana's Technical Advantages

The podcast highlighted several technical advantages that set Solana apart from other blockchain platforms. Matthew Sigel noted:

"If the monolithic version can succeed, then they'll be able to capture more of the value versus Ethereum who is sharing it with all these L2s. So simply put like we think Solana has pricing power at that."

This potential for greater value capture, combined with Solana's high throughput and low latency, positions it as a strong contender in the smart contract platform space.

Institutional Adoption and Challenges

While discussing the challenges facing Solana, the conversation turned to institutional adoption and the impact of past network outages. Matthew Sigel acknowledged:

"Institutions may have an extremely hard time looking at Solana, seeing those pass outages and actually choosing the chain."

However, he also noted positive developments, such as Visa's announcement to start settlements on Solana, indicating growing institutional interest despite past challenges.

The Role of Firedancer

The discussion touched on Firedancer, an alternative client implementation for Solana being developed by Jump Crypto. While potentially offering significant performance improvements, Patrick Bush raised concerns about centralization:

"I think something like jump building this is inherently going to have a substantial advantage over everyone else and they'll probably become the chief block builder of the ecosystem."

This highlights the delicate balance between performance improvements and maintaining decentralization in blockchain ecosystems.

Macro Considerations and Geopolitics

The conversation expanded to include broader macroeconomic and geopolitical considerations. Patrick Bush offered an interesting perspective on crypto's role in a changing global landscape:

"I think we're at a moment where we're moving more towards a multi-polar, maybe even a bipolar kind of setup, where there's definitely China, maybe Russia, maybe India, maybe whoever else has come into play. And I think because of that, crypto straddles an interesting paradigm, where it's like a neutral financial system."

This view positions cryptocurrencies as a potential neutral ground in an increasingly multipolar world, offering a financial system outside the direct control of any single global power.

Favorite Verticals in Crypto

When asked about their favorite verticals within the crypto space, both Matthew Sigel and Patrick Bush highlighted areas they find particularly promising. Matthew emphasized:

"Stable coins as a new payment rails, NFTs as a form factor for like Fortune 500 companies, and D-Pint because the world is hungry for physical infrastructure with lower take rates than Verizon and AT&T and Uber, just to put it very simply."

Patrick expressed enthusiasm for projects that disrupt traditional rent-seeking models:

"I really love that this irrigation narrative where you have all these like this entities, they're just rent seeking, they're taking too much like think about Uber. Uber is taking like, I think something like 30 to 40% of what the drivers making."

These perspectives highlight the potential for blockchain technology to reshape various industries by introducing more efficient and equitable models.

Advice for New Crypto Investors

The podcast concluded with some rapid-fire questions, including advice for new crypto investors. Matthew Sigel cautioned against using leverage:

"I think that retail investors should stay away from leverage, generally speaking, that most of the pain of the last cycle was due to folks borrowing money irresponsibly and a super volatile asset class."

Patrick Bush advised caution when it comes to following influencers in the space:

"I would tell them to avoid influencers. There's just so much dissemination of false information out there that gets people to do things that are so optimal, pushes them into scams, whatever else."

These pieces of advice underscore the importance of responsible investing and critical thinking in the volatile crypto market.

The Future of Crypto

Looking ahead, both experts shared their visions for the ideal state of crypto in five years. Matthew Sigel expressed hope for broader institutional adoption:

"I would like to see central banks buying Bitcoin for their reserves as a way of kind of validating the stranded assets that have resulted from this maniacal focus on that zero."

Patrick Bush emphasized the potential for crypto to empower individuals:

"I would like to see crypto force the data juggernauts to give something back to the people that provide that data and generate that data. I would like to see that generate something that leads to a bill or some sort of way which it gives people data rights to data privacy."

These forward-looking statements highlight the transformative potential of blockchain technology beyond just financial applications, touching on issues of monetary policy, data rights, and individual empowerment.

In conclusion, the Lightspeed podcast featuring Matthew Sigel and Patrick Bush from VanEck provided a comprehensive look at the firm's bullish outlook on Solana and the broader cryptocurrency ecosystem. Their insights into valuation methodologies, technical advantages, and potential future developments offer valuable perspectives for both retail and institutional investors navigating the complex world of digital assets.

Facts + Figures

• VanEck predicts Solana (SOL) to reach $335 by 2030 in their base case scenario
• VanEck's bull case for Solana exceeds $13,000 by 2030
• VanEck was the first TradFi firm to file for a spot Bitcoin ETF in 2017
• VanEck launched a Solana ETN in Europe in the summer of 2021
• VanEck has about $80 billion in assets under management
• Solana's potential to onboard an app with 100 million users is a key factor in VanEck's bullish outlook
• VanEck's Ethereum model assumes a 70% market share of all value sent across open source blockchains
• VanEck's Solana model assumes a 30% market share, less than half of Ethereum's projected share
• Visa announced plans to start settlements on Solana
• Uber takes approximately 30-40% of what drivers make, according to Patrick Bush
• VanEck made an investment in HiveMapper, a dash cam mapping project on Solana
• The largest private Argentinian oil and gas company announced plans to start mining crypto with their vented methane
• VanEck's price target for Ethereum is approximately a 5x return in their base case
• VanEck's price target for Solana is a 10x return, despite a lower projected market share compared to Ethereum

Questions Answered

What is VanEck's price prediction for Solana (SOL) by 2030?

VanEck's base case scenario predicts Solana (SOL) to reach $335 by 2030. This prediction is based on their analysis of Solana's potential market share, technological advantages, and the possibility of onboarding an app with 100 million users. Their bull case scenario is even more optimistic, with a price target exceeding $13,000 by 2030.

How does VanEck approach valuing smart contract platforms like Solana and Ethereum?

VanEck approaches valuing smart contract platforms by looking at their potential to disintermediate the existing financial system. They focus on projects with sufficient decentralization and open-source code. For Ethereum, they assume a 70% market share of all value sent across open-source blockchains in their model. For Solana, they project a 30% market share but expect higher value capture due to its monolithic structure compared to Ethereum's reliance on Layer 2 solutions.

What are the key factors behind VanEck's bullish outlook on Solana?

VanEck's bullish outlook on Solana is driven by several factors. These include Solana's high performance and low latency, its potential to onboard an app with 100 million users, the possibility of implementing local fee markets for more efficient resource pricing, and its resilience demonstrated after the FTX collapse. They also see Solana's monolithic structure as an advantage for value capture compared to Ethereum's multi-layer approach.

How does VanEck view the impact of past network outages on Solana's institutional adoption?

VanEck acknowledges that past network outages pose a challenge for Solana's institutional adoption. Matthew Sigel noted that institutions may have difficulty choosing Solana due to these past issues. However, they also recognize positive developments, such as Visa's announcement to start settlements on Solana, indicating growing institutional interest despite these challenges. The implementation of improvements like QUIC and state compression, along with the potential of Firedancer, are seen as steps toward addressing these concerns.

What advice does VanEck offer to new crypto investors?

VanEck offers two key pieces of advice for new crypto investors. First, Matthew Sigel strongly advises retail investors to stay away from leverage, noting that much of the pain in the last cycle was due to irresponsible borrowing in a highly volatile asset class. Second, Patrick Bush recommends avoiding crypto influencers, warning about the prevalence of misinformation that can lead investors into suboptimal decisions or scams. They emphasize the importance of responsible investing and critical thinking in the crypto market.

How does VanEck see crypto's role in the changing global geopolitical landscape?

VanEck sees crypto as potentially playing a crucial role in an increasingly multipolar world. Patrick Bush suggests that as the global landscape shifts from a unipolar to a multipolar or bipolar setup, cryptocurrencies could serve as a neutral financial system. This perspective positions crypto as a potential bridge between different geopolitical spheres, offering a financial infrastructure that isn't controlled by any single global power.

What are some of the favorite crypto verticals for VanEck's analysts?

VanEck's analysts expressed interest in several crypto verticals. Matthew Sigel highlighted stablecoins as new payment rails, NFTs as a tool for Fortune 500 companies, and decentralized physical infrastructure (DePIN) projects. Patrick Bush showed enthusiasm for projects that disrupt traditional rent-seeking models, such as those in the ride-sharing or telecommunications sectors. Both see potential in blockchain technology to introduce more efficient and equitable models across various industries.

How does VanEck envision the ideal state of crypto in five years?

VanEck's vision for the ideal state of crypto in five years includes broader institutional adoption and individual empowerment. Matthew Sigel hopes to see central banks buying Bitcoin for their reserves, validating it as a solution to issues caused by excessive money printing. Patrick Bush envisions crypto forcing major tech companies to give back value to individuals who generate data, potentially leading to enhanced data rights and privacy. Both see crypto playing a transformative role beyond just financial applications.