Solana is confronting a significant market imbalance, with nearly 80% of its circulating supply held at a loss. The network is exploring accelerated deflation measures to reduce selling pressure and stabilize token dynamics.
On-Chain data shows top-heavy positioning
The SOL token has endured a thirty-two percent drawdown over the past month, coinciding with a broader risk-off environment that has kept Bitcoin near $80,000. These losses affect a large segment of legacy holders, even as Solana’s recent institutional adoption gains traction through the launch of spot exchange-traded funds, which continue to draw capital into the ecosystem.
Market intelligence from Glassnode indicates that SOL’s supply distribution is “top-heavy,” meaning a large portion of tokens were acquired at higher prices. This creates latent sell pressure, as holders who purchased at elevated levels face unrealized losses. Historically, such extreme positioning tends to resolve either through sudden capitulation or a prolonged digestion period.
The launch of US spot Solana ETFs has added a contrasting dynamic. These funds have accumulated approximately $510 million in net inflows since inception, increasing total assets under management to nearly $719 million, according to data from SoSoValue.
The inflows demonstrate a structural mismatch: institutional vehicles are absorbing tokens at a pace slower than legacy holders and validators are offloading them.
At $126.9, about 79.6% of Solana’s circulating supply (r~478.5M SOL) is now in loss, underscoring how top-heavy the market structure had become before the recent contraction.
— glassnode (@glassnode) November 23, 2025
📉 https://t.co/jEmGiESmpL pic.twitter.com/P1M0H5cjtG
SIMD-0411 proposal aims to accelerate deflation
In response to the sell-side pressure, Solana contributors introduced the SIMD-0411 proposal on November 21. The plan targets the token’s inflation schedule, which currently declines by fifteen percent annually, with a terminal inflation floor of 1.5% projected for 2032. The new framework proposes doubling the pace of disinflation to thirty percent per year, bringing the terminal milestone forward to early 2029.
The proposal is a single-parameter adjustment, designed to simplify governance while significantly reducing cumulative token issuance. Modeling suggests that over the next six years, issuance would decrease by 22.3 million SOL, equivalent to roughly $2.9 billion in potential sell pressure at current market prices.
Total supply would drop to around 699.2 million, compared with 721.5 million under the existing schedule.
Recalibrating staking yields to encourage activity
SIMD-0411 also targets the incentive structure of staking. Nominal staking yields currently hover at 6.41%, encouraging passive holding rather than active participation in decentralized finance applications. Under the proposed changes, yields would compress over the next three years, falling to approximately five percent in the first year, three and a half percent in the second, and 2.4% in the third. The intention is to encourage capital to flow into lending, liquidity provision, and trading, increasing network throughput and circulating supply.
Deflation, validator rewards, and network dynamics
Accelerated deflation under SIMD-0411 will reshape both token supply and network incentives, with outcomes closely tied to user demand and blockchain activity. If demand remains limited, the primary effect may be a gradual easing of sell pressure rather than an immediate price response. However, even modest growth, combined with ETF accumulation reducing the circulating float, could tighten supply and amplify price sensitivity to transactions.
During periods of heavy network usage, fee burns may surpass issuance, creating moments of effective net deflation and linking SOL’s value more directly to activity rather than emission schedules.
These changes also interact with validator economics. As inflation declines, token rewards, the backbone of validator revenue will compress, but this is timed to coincide with the Alpenglow consensus upgrade, which lowers vote-related operational costs. By reducing expenses as rewards shrink, the network aims to maintain validator profitability while nudging staked capital into more active roles, such as lending, liquidity provision, or trading.
The result is a dual effect: enhanced network utility through increased activity, alongside a transition toward a scarcer, more tightly managed token supply.
Oleksii Shumak
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