I recently went through some data and found a rather surreal phenomenon.

At the bull market peak, SOL soared to $247 with a market cap of $75 billion. Four years later, the market cap is still hovering around $75 billion, but the price has dropped to $134. With the same amount of money and the same market cap, the price has been slashed by nearly half. Where did the money go?

The answer lies in the circulating supply. In 2021, SOL’s circulating supply was just over 300 million. Now it has ballooned to 560 million, almost doubling. An annual inflation rate of 4.13% is like opening the floodgates—no matter how attractive staking rewards are, they can’t withstand the onslaught of new coins flooding the market. The market cap hasn’t grown, but the number of coins keeps increasing, so naturally, the price gets diluted.

Now, let’s look at the other side for comparison. A certain established public chain had a market cap of $380 billion at $3,200 in 2022, and now it’s still around $380 billion with a price just over $3,100—almost rock solid. The secret? Its Merge upgrade and burn mechanism pushed inflation below 0.7%, and at peak times even caused deflation. Over four years, the supply only grew by 0.6%. This supply control has locked in scarcity.

By comparison, SOL’s initial 8% inflation and only a 15% annual reduction is too mild—a large portion of early holders’ shares have been heavily diluted without them realizing it. However, the community has noticed the problem. Proposal SIMD-0411 aims to increase the reduction rate to 30%, targeting an inflation rate of 1.5%. Whether it passes depends on the vote, but if no drastic changes are made, the next market cycle might again see the awkward scenario of “market cap rises, but the price doesn’t move.”

Ultimately, one is using burning to subtract, while the other is still adding through minting. If inflation isn’t addressed, even the strongest ecosystem will be dragged down by the increasing supply.