Solana’s New Addresses Surge 124% While SOL Price Drops 9%. What’s Going On?

Solana's Address Surge Doesn't Boost SOL Price

Introduction

Solana's new address count has surged 124% since early September, according to on-chain analytics firm Santiment. This increase translates to around 1.71 million new wallets being created each day. However, the SOL price moved in the opposite direction, dropping 9% over the last week and putting it about 62% below its all-time high of $293.

The Reason Behind the Surge

The figure from Santiment reflects the growth in network addresses, which counts addresses appearing on the blockchain for the first time. An address acts like a public account number, and creating one is quick and free, allowing individuals or trading algorithms to set up multiple addresses. This growth could include airdrop seekers using multiple wallets to qualify for free token distributions, along with trading bots and exchanges managing multiple accounts.

The Disconnect Between Network Activity and Token Value

The 14 million stablecoin addresses matter more, since users must move real dollars onto Solana to hold stablecoins there. However, like the address count, this figure may include multiple addresses per user. Transaction fees are the primary link between network activity and SOL's price, as each transaction incurs a small fee paid in SOL. Since Solana is designed to be cost-effective, even with billions of transactions, the fees generated are minimal relative to its overall market value.

The Impact of ETFs on SOL's Price

U.S. spot Solana ETFs experienced a net outflow of about $17.7 million over three consecutive days from October 5 to October 7, according to SoSoValue, following a previous week where inflows were just $2.4 million. A net outflow means investors withdrew more funds from these ETFs than they deposited, prompting fund managers to sell SOL to cover the withdrawals. This selling trend correlates much more directly with SOL's price decline than the increase in new addresses does.

Conclusion

The surge in Solana addresses alone isn't enough to boost SOL's price. New addresses do not necessarily translate to increased demand for the token, highlighting the disconnect between network activity and token value.