Solana’s Price Could See a Supply Squeeze as Validators Vote to Cut $1.5 Billion in New SOL

Solana’s price (SOL-USD) could see a supply squeeze as validators vote on two proposals that directly cut the creation of new SOL tokens. Together, proposals SGP-0002 and SGP-0003 aim to trim future token creation by $1.4 billion to $1.5 billion over the next six years. This change targets the network’s current structure, where holders earn 5.25% in rewards mostly because the network prints 3.78% more new coins each year.

The two proposals introduce simple changes to how SOL enters and exits the market:

• SGP-0002 (Slows New Token Creation): Cuts the creation rate of new tokens in half each year, reaching Solana’s lowest inflation target by 2029 instead of 2032. This causes yearly staking rewards to drop from around 5.25% down toward 2.25% over three years.
• SGP-0003 (Increases Token Destruction): Permanently destroys (burns) a portion of network transaction fees, jumping daily SOL token burns from 600–800 SOL up to 7,500–9,000 SOL.

It’s Simply Just Supply and Demand

Printing fewer new Solana coins each day cuts total token creation. When validators earn fewer new tokens as staking rewards, they have fewer coins to sell for cash, which reduces constant downward pressure on SOL’s price.

At the same time, burning a larger share of transaction fees permanently destroys existing SOL. This removal of tokens actively shrinks the total circulating supply of SOL in the market.

If investor demand for Solana remains stable or grows while incoming SOL supply shrinks, each remaining coin becomes scarcer. This shift in market supply can trigger buying pressure and help push SOL prices higher over time.

What Past Crypto Upgrades Reveal About Price Reactions

Historical upgrades on other major blockchain networks demonstrate how supply reductions can impact asset prices. When Cosmos passed Proposal 848 to cut token inflation in late 2023, ATOM prices jumped 25% over the following month. Similarly, when Ethereum introduced its EIP-1559 fee burn mechanism in August 2021, ETH surged 37% over 30 days and 60% over three months. Asset manager 21Shares noted that in both past cases, near-term price gains came from a mix of the supply cut signal and overall market conditions.

SOL trades at $104.30 following a 20% gain over the past week. Voting on the proposals runs through epoch 1023. If Solana’s validators approve the measures, core developers will still need several months to finalize and launch the code before any supply cuts hit the SOL network.