Galaxy Digital Shifts $105.48 Million from Ethereum to Solana Amid Scalability Concerns

Mike Novogratz’s Galaxy Digital has made a significant move in the cryptocurrency market by offloading approximately $105 million worth of Ethereum (ETH) in favor of Solana (SOL). This decision comes at a time when investors are increasingly concerned about Ethereum's scalability issues, high transaction fees, and the growing competition from more efficient networks like Solana.

According to a tweet by Lookonchain, Galaxy Digital deposited 65,600 ETH, valued at $105.48 million, to Binance and withdrew 752,240 SOL, valued at $98.37 million, from the same exchange over the past two weeks. This transaction highlights a strategic shift in Galaxy Digital's portfolio, aligning with the broader market dynamics between Ethereum and Solana.

Recent data from Dune Analytics shows that decentralized exchanges (DEXs) on the Solana network have processed over $395 billion in trading volume over the past three months, surpassing Ethereum’s $364 billion in the same period. Additionally, the number of active Solana addresses has reached 224 million, significantly outpacing Ethereum’s 79 million. These figures indicate a growing preference for Solana among users and investors.

Galaxy Digital's move also coincides with its recent involvement in Solana’s protocol governance. On April 17, the firm proposed a new voting system called “MESA” to introduce a market-driven approach to Solana’s inflation control. This proposal follows SIMD-228, which failed to reach consensus on specific parameters. Under current rules, Solana’s inflation begins at 8% and tapers to 1.5% annually, with the present rate at 4.6% and over 64% of SOL locked in staking.

This shift in focus towards Solana reflects a broader sentiment within the crypto industry. In March, Ordinals co-founder Casey Rodarmor expressed skepticism about Ethereum’s future, citing its scalability struggles and the rising competition from faster, lower-cost networks like Solana. He also highlighted Bitcoin’s prestige and security, while dismissing Ethereum’s long-term prospects.

Despite Ethereum remaining the largest DeFi ecosystem, Solana’s rise in user activity, network performance, and DEX volume has positioned it as a strong competitor. In July 2024, Solana surpassed Ethereum in monthly DEX volume for the first time, with $56.84 billion compared to Ethereum’s $53.86 billion. The competition between the two networks has remained intense since then.

Ethereum, however, is not standing still. Ethereum co-founder Vitalik Buterin has proposed significant changes to the network’s proof-of-stake (PoS) consensus mechanism. The proposal aims to reduce the number of validator signatures required per slot from approximately 28,000 to 8,192, thereby decreasing the network’s computational load and enhancing scalability. This move is part of Ethereum’s ongoing efforts to regain its competitive edge and attract more users.

At the time of reporting, Solana was trading at $146.65, up 0.52% in the past 24 hours, while Ethereum was at $2,518, down 0.40% in the same period. These price movements reflect the ongoing shifts in market sentiment and the competitive dynamics between the two cryptocurrencies.