Andrew Kang, co-founder of Mechanism Capital, has expressed concerns about the potential volatility and impending price correction of Solana (SOL). His comments come amid a broader discussion about the delayed second wave of US spot Bitcoin ETFs, which he believes could be pushed back by one to two quarters. Kang predicts that the delay in ETF approvals could lead to a lack of immediate capital influx into the market, potentially reversing the current upward momentum.

Kang highlights Solana's price volatility, which has been significantly influenced by meme-driven trading activities. He believes that if meme trading takes a pause for the next few months, Solana's price could drop to around $80, indicating a potential 41% decline from its current price level.

Reasons Behind Solana's Potential Price Crash

Crypto analyst TexasHedge further elaborated on Kang's insights, providing a nuanced view of the market dynamics that influenced Solana's price movements. He discussed the historical attractiveness of Solana as a high-risk, high-reward investment, often referred to metaphorically as "the world's best casino." This environment attracted significant capital inflows, which were crucial in driving up Solana's valuation during its peak periods.

TexasHedge shared his previous investment approach, which saw Solana as a compelling trade based on several factors: the re-rating of Solana, the strong influx of capital into SOL due to the memecoin frenzy, and Solana's movement often mirroring broader crypto market trends. However, he noted that these factors are no longer as compelling, and Solana now faces several structural challenges that might contribute to a downward price correction.

These challenges include an inherent annual inflation of 5.21%, translating to about 82,570 SOL entering the market each year, and the regular monthly release of locked SOL purchased from FTX, which increases supply and potentially depresses prices if demand doesn't match up. "Even absent a cooling of memecoin mania, the outlook over the next few months is challenging," TexasHedge concluded, indicating a tough road ahead for Solana amidst reduced speculative memecoin trading and ongoing market pressures.

At press time, SOL traded at $137.