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A rangebound market has discovered power off the lows. The week opened inexperienced throughout the board, with each fairness indices and crypto majors buying and selling increased. BTC has moved up 5% from its latest low, and this power is mirrored in ETH and SOL, every up 9% and 11% from their latest lows, respectively. L2s had been the greatest winner on Monday’s session, whereas Modular and Gaming had been the greatest losers on the day.
Zooming out to the month-to-month timeframe, L2s stay the notable winner. Whereas most indices are down for September, L2s have notched a achieve of 32%.
Below the floor, each L2 tracked in the index is down for September, besides MNT and IMX, up 62% and 43%, respectively. Whereas markets stay uneven and rangebound, pockets of alpha will proceed to persist.
Relating to ETF flows, final week was the most damaging week in mixture since the March selloff. BTC ETFs exhibited ~$900 million in web outflows, whereas ETH ETFs noticed -$800 million. The course of ETF flows proceed to reflect the worth motion on the majors, additional evidencing the “flows-driven market” thesis.
In distinction, and regardless of final week’s selloff, SOL ETFs posted their most constructive week in web inflows since inception, registering +$59 million. This marks 5 consecutive weeks of web inflows for SOL ETFs. The pending approval of SOL ETFs underneath the ‘33 Act, prone to happen inside the subsequent few weeks, may doubtless speed up this momentum. To reiterate, we view it as doubtless that SOL ETFs accredited underneath the ‘33 Act can entice multiples extra in AUM than what’s already exhibited in the REX-Osprey SSK.
Whereas we’re constructive on inflows into these new SOL ETFs upon approval, the pattern in a number of of Solana’s community fundamentals stays unfavorable. DEX volumes, REV and utility income stay subdued. Moreover, Solana has been steadily shedding market share in Community Income to each Hyperliquid and BNB. New inflows from these ETFs may proceed to help SOL’s worth motion, however the onchain knowledge says the exercise is more and more taking place elsewhere.
Prop AMMs, the aggregator wars and Solana’s REV: Are all of them associated?
Final month, I wrote about prop AMMs, explaining how they had been altering Solana’s market construction. As we speak, I wish to discuss their continued dominance and two intimately associated dynamics that stay under-discussed: the aggregator wars and the sharp lower in Solana’s REV.
Let’s begin with continued dominance. HumidiFi has consolidated as the high prop AMM by buying and selling quantity over the previous few weeks. It now accounts for nearly 50% of SOL-stablecoin volumes on the chain, and final week it accounted for 35% of complete Solana DEX volumes, surpassing all different DEXs, together with “conventional AMMs” corresponding to Orca, Raydium and Meteora.
September will mark the first month ever wherein prop AMMs (HumidiFi, SolFi, and so forth.) surpass conventional AMMs (Orca, Raydium, and so forth.) in month-to-month Solana DEX quantity. When SolFi launched in October 2024, all prop AMMs mixed accounted for simply 7% of complete volumes on the chain. This month, HumidiFi alone has accounted for 28% of complete DEX volumes.
Switching gears a bit, a number of weeks in the past, Thogard from FastLane revealed an article arguing that the SVM is a poorly suited execution surroundings for prop AMMs and that they might thrive on Monad as a substitute. His two core arguments had been:
- “In the SVM, the finest prop AMM is chosen by the aggregator after simulating all of the potentialities…however by the time the transaction is executed that prop AMM might not be the finest.”
- “In the SVM, any prop AMM can pressure a transaction to revert, forcing aggregators to keep up white lists, which reduces competitors and will increase integration time.”
I tried to debunk his thesis by declaring that he was lacking a vital piece of the story: The proliferation of prop AMMs on Solana has additionally led to elevated competitors in the aggregation entrance. Why does this matter?
It’s vital to recall that prop AMMs don’t have a public frontend. Because of this the overwhelming majority of their quantity comes from DEX aggregators. Thogard’s second argument depends on the false premise that Jupiter has a monopolistic place: “I’ve been instructed by associates that getting their prop AMM listed on Jupiter takes >three months and that the recreation has turn out to be political.” Whereas Jupiter dominates aggregator volumes in the present day, on no account are they freed from competitors. If Jupiter takes too lengthy to combine new prop AMMs, different aggregators like DFlow or Titan will gladly hit their contracts and have an edge to supply higher worth execution for the finish consumer. Since aggregator loyalty is only price-driven, Jupiter dangers shedding order stream by “being political.”
The chart under exhibits that DFlow and Titan’s volumes have elevated dramatically since late August, averaging roughly $1.5 billion in mixed quantity over the previous two weeks. Be aware that Titan’s latest surge is because of its public launch on Sept. 18, with the staff reporting that their proprietary algorithm is outperforming opponents’ pricing 87% of the time. For the lowered competitors argument to be legitimate, all aggregators must collude to keep up the identical prop AMM integrations when, in actuality, the reverse happens. Aggregators are literally incentivized to combine new routes as quick as doable to keep up or improve their routing win price.
That leaves us with just one argument to handle, which is the theoretical delay between simulation and execution. On this regard, DFlow unveiled JIT Routing (Simply-in-Time Routing) final Thursday, an answer that allows the aggregator to dynamically re-optimize swaps onchain throughout execution. Each time a swap route features a prop AMM leg, DFlow’s onchain program will test the prop AMM’s worth simply earlier than executing that leg. If the worth has moved considerably from the preliminary quote (indicating the initially deliberate path is not optimum), the DFlow router will routinely reroute the commerce to the present finest venue, all inside the identical transaction. It will result in decrease realized slippage for customers and increased transaction success charges. Notably, it showcases that Solana-native groups will work round any SVM’s theoretical limitations to ship the finest expertise and worth execution to their customers.
The chart under exhibits the share of DEX aggregator quantity flowing to prop AMMs for the SOL-stablecoin pair. We observe that DFlow routes 98% of SOL-stablecoin volumes to prop AMMs vs. 80% for Jupiter. This discrepancy might partly clarify why DFlow beats Jupiter in execution high quality for the SOL-USD pair, particularly for bigger sizes.
The rise of prop AMMs is certainly one of the most attention-grabbing issues taking place on Solana in the present day, and I believe we’re nonetheless greedy their full implications. As an illustration, final week SOL-stablecoin volumes accounted for 74% of complete DEX volumes on the chain, a determine we haven’t seen in over 4 years! Concurrently, memecoin volumes have fallen down a cliff, with a ten% market share final week, the lowest share since December 2023.
This shift in market construction has downstream implications for Solana’s REV. Final week, Solana generated $9.1 million in REV, the lowest weekly print since September final yr, earlier than the US election. Whereas not all of those tendencies may be attributed solely to prop AMMs, they’ve actually performed a big position. It will likely be attention-grabbing to observe if prop AMMs proceed to evolve in the coming months and the second-order results in Solana’s ecosystem (aggregators, quantity composition, REV, and so forth.).
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