VanEck Forecasts Solana Market Cap Growth to 22%, $520 Price Target by End of 2025

Solana (SOL) currently accounts for 15% of the good contract platform (SCP) market capitalization, with projections indicating an increase to 22% by the end of 2025, which may push SOL’s value to $520, based on a recent report by VanEck.

Solana’s market cap expansion is driven by its strong developer presence, growing share of decentralized exchange (DEX) volumes, rising revenues, and an increasing active user base.

VanEck’s valuation model ties Solana’s anticipated SCP market share to U.S. M2 money supply growth, which has historically correlated with cryptocurrency market capitalization. M2 consists of cash, checking deposits, and short-term investments and serves as a broad measure of money supply in the US and eurozone.

The M2 money supply is projected to reach $22.3 trillion by the end of 2025, sustaining a 3.2% annualized growth rate since October 2023.

Regression analysis suggests total SCP market capitalization will grow 43% to $1.1 trillion by the end of 2025, surpassing its 2021 peak of $989 billion.

Using an autoregressive (AR) model, VanEck estimated that Solana’s market capitalization may reach roughly $250 billion. With 486 million floating tokens, this suggests a SOL price target of $520.

Scaling revenues

Solana has gained prominence among layer-1 blockchains, leading in DEX volumes (45% market share), chain revenues (45%), and daily active wallets (33%) as of January 2024.

VanEck projected that Solana’s anticipated revenues may reach an annualized rate of $6 billion if the current trend continues. The network’s revenues come from three main sources: base fees, priority fees, and maximal extractable value (MEV).

The base fees represent the minimal network usage price and amounted to 1% of Solana’s January revenue. Meanwhile, the priority fees are tips users pay for faster transaction inclusion, totaling 43% of the network’s revenue.

MEV represented the majority of Solana’s revenue last month, as 56% was secured through fees earned by block builders optimizing transaction execution.

Boosting MEV

Solana’s MEV revenue structure allows block builders to capture 60% of MEV value, with validators retaining 40%. If validators were to capture 80% of MEV, mirroring Ethereum’s structure, MEV-derived revenue may increase from $3.4 billion to $6.8 billion, a 56% rise in SOL’s validator revenue.

The report highlighted that improvements to Solana’s Jito system, protocol enhancements, and the implementation of Firedancer may further facilitate this expansion.

However, in its current state, Solana’s MEV capture is inefficient due to private memory pools and insider advantages.

Roughly 92% of validators use Jito’s MEV auction software, but many also engage in private mempools, giving some traders a competitive edge. Addressing this situation may increase Solana’s MEV revenue capture.

The report proposed solutions, including validator whitelists to prevent collusion, application-level MEV protections to reduce front-running, RFQ (Request-for-Quote) systems to improve pricing transparency on DEXs, and software patches to mitigate known attack vectors.

Moreover, a multi-leader model allowing multiple validators to suggest blocks concurrently would reduce dominant block builder influence.

Dapp growth

Solana’s application ecosystem has expanded, overtaking Ethereum in decentralized application revenue. In 2022, Ethereum dApps generated 84% of all revenue, while Solana accounted for 0.26%. By 2024, Ethereum’s share fell to 32%, while Solana’s rose to 42%.

Solana’s dApp revenue surged from $4 million in 2022 to $1.25 billion in 2024. The network has also become a primary destination for developers, adding 7,625 new developers in 2024, compared to Ethereum’s 6,456.

If MEV optimizations are successfully implemented, Solana’s validator revenue may increase significantly, supporting higher demand for SOL and positioning its value over $500 by the end of the year.

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