Originally posted at faybomb.substack.com
It’s been a tough year for Solana (SOL-USD). After what feels like roughly a half dozen network stoppages over the last year or two, things really unraveled for SOL holders when FTX collapsed last November. Fair or not, Solana has been seen as something of a “SamCoin” due to Sam Bankman-Fried’s (SBF) apparent connections to the chain:
SBF’s slush fund trading desk Alameda Research invested a few hundred million in Solana Labs
Alameda Research held over $1 billion in SOL on it’s balance sheet before it collapsed
SBF was building Solana-based applications
More recently though, Solana has started to find some footing.
Data by YCharts
Even though SOL is still well behind it’s pre-FTX value while Bitcoin (BTC-USD) and Ethereum (ETH-USD) have recovered, SOL is actually up about 150% from the late December lows. Equally interesting is what I would describe as market disinterest to what is probably a fairly significant development.
Visa Settling With Solana
I’m sure everyone is familiar with payment processing behemoth Visa V 0.61%↑. Just glancing in my own wallet, I see three pieces of plastic that prominently feature the company’s logo.
Source: Bitcoin Depot
Nobody does more annual transaction volume than Visa and despite my obvious Bitcoin bullishness, I’ve maintained for some time that the killer application for crypto is stablecoin payments. While Bitcoin settles native asset transfers very well for large value transactions, it’s not great for everyday usage and adoption of the Lightning Network is still somewhat underwhelming. In my last Seeking Alpha article covering Bitcoin Depot BTM 8.66%↑, I left readers with this thought:
It's also not out of the realm of possibility that stablecoins could take share of remittances from Bitcoin. As a Bitcoin-only seller, this would have a negative impact on Bitcoin Depot and with less than 30% of the company's surveyed users buying BTC as an investment or store or value, I think stablecoin adoption is a legitimate long term concern.
This is why I find it all the more interesting that Visa will be utilizing the Solana blockchain for USDC settlements. Per Visa’s press release earlier this week:
When consumers use Visa cards to make a purchase at any of the millions of Visa-accepting merchant locations around the world, they can experience the convenience of nearly instant payment authorizations. But what they don’t see is that the funds used for their purchase need to move between their bank (the issuer) and the merchant’s bank (the acquirer). This is where Visa’s treasury and settlement systems enable the clearing, settlement and movement of billions in transactions a day, making sure the correct amount in the preferred currency is received from the issuer and sent to the acquirer. This process happens seamlessly between nearly 15K financial institutions and across more than 25 currencies globally.
Bold my emphasis. Visa is agreat because it just works. The user doesn’t have to understand the plumbing. But those funds moving between banks has a cost and that cost is generally passed onto the merchant and/or consumer through processing fees. It’s one of the big reasons why I buy honey at the local farmer’s market with cash rather than with a card; I’m avoiding a 5% processing fee. Now Visa is foreshadowing cheaper fees… at least for Visa. And there’s an increasing possibility that people who use Visa cards may soon be using public crypto blockchains without realizing it.
What To Watch Now
The stablecoin market has been confusing in 2023. Concerns about the collateral backing the leading stablecoin (Tether) haven’t exactly created a inflow of funds to USDC as a safer alternative. There are a few different theories as to why that is the case but I don’t want to speculate on those here. Rather, if you’re actually interested in this stuff, I think it’s important to keep an eye on what happens to the USDC balance on Solana going forward:
Source: Defi Llama, Solana Stables as of 9/7/23
Currently, USDC is the 2rd largest stablecoin on the Solana blockchain by market cap after Tether (USDT-USD). At $1.5 billion in total stablecoin value, Solana is actually ranked 5th in total stablecoin market. SOL might be an interesting speculation on this Visa news, but I’d personally wait until the stablecoin market cap on that network grows before jumping into any SOL positions. Particularly, we’d want to see the USDC balance on that network increase and overtake USDT as the top coin. That’s how I see it at least.
Disclaimer: I’m not an investment advisor. I trade stonks in my pajamas and eat Welch’s fruit snacks from Costco COST 0.37%↑for lunch. I’m personally long BTC and ETH.