September 9, 2024
Sol Strategies, then still operating under its original name, Cypherpunk Holdings, had not yet rebranded. It continued to trade on the Canadian Securities Exchange, a market typically reserved for small and micro-sized businesses. Just a few months earlier, the company had hired former Valkyrie CEO Leah Wald as its new CEO. At the time, Cypherpunk was little-known and attracted minimal investor attention.
Meanwhile, Upexi focused on promoting consumer products for direct-to-consumer brands, specializing in areas like pet care and energy solutions on Amazon. In this crowded market, competition for clicks was fierce. DeFi Development Corp (DFDV), then still operating under its old name, Janover, was preparing to launch a marketplace connecting real estate syndicators and investors. Sharps Technology, on the other hand, manufactured specialized syringes for healthcare providers, a niche area of medical technology that attracted little investor attention. These companies were small in size and ambition back then. Their combined Solana (SOL) holdings amounted to less than $50 million. A year later, things have changed dramatically. Today, they proudly stand listed on Nasdaq—the world's second-largest stock exchange—holding over 6 million SOL tokens, valued at a combined $1.5 billion. This represents 30 times the value of their Solana tokens from a year ago. Last week, the ringing of the Nasdaq bell in New York wasn't the only event marking Sol Strategies' listing on the exchange. A virtual bell also rang, marking the same milestone: STKE officially began trading. The company invites community members to join the ceremony by visiting stke.community and "ringing the bell" through a Solana transaction. This action will forever mark their participation in this historic moment. In many ways, this marks a "graduation" for Sol Strategies, a firm previously listed on the Canadian Securities Exchange (under the symbol "HODL") and the OTCQB Venture Exchange (under the symbol "CYFRF"), a stock market for mid-cap companies. I call it "graduation" because gaining access to the Nasdaq Global Select Market is no easy feat. Known for its rigorous standards, it's typically reserved for blue-chip companies. Passing this test has given Sol Strategies something most crypto companies dream of but rarely achieve: legitimacy. This is also a key reason why Sol Strategies went public, even though institutional investors seeking Solana exposure on Wall Street already had Upexi and DeFi Development Corp to invest in. Unlike Upexi and DeFi Development Corp, which were already publicly traded companies before their pivot to Solana Money Management and each held over 2 million SOL, Sol Strategies chose the slow path. It established a validator operation, earned institutional authorizations like ARK Invest’s 3.6 million SOL, passed a SOC 2 audit, and strategically positioned itself on the Nasdaq Global Select Market, the exchange’s top market. While other firms simply hold SOL, Sol Strategies actively operates the infrastructure that supports it, turning those holdings into a viable business. I delved into Sol Strategies' balance sheet to understand the story behind the numbers. For the quarter ending June 30th, Sol Strategies reported revenue of $2.53 million Canadian dollars (approximately $1.83 million USD). While this number itself may seem ordinary, the real story lies in the details. This revenue came entirely from the approximately 400,000 SOL staked and operating validators securing the Solana network, rather than from selling traditional products. While Upexi's non-cryptocurrency secondary commerce business has been a drag on its growth, DFDV relies heavily on ongoing fundraising to fuel growth, and 40% of its revenue still comes from its non-cryptocurrency real estate business. By offering validator-as-a-service, Sol Strategies has opened up a new revenue stream from its Solana fund management business. This approach provides consistent income without the burden of growing debt or traditional overhead. Sol Strategies delegates SOL on behalf of its institutional clients, including a 3.6 million SOL delegation from Cathie Wood's ARK Invest in July. Commissions from these delegations generate a steady income stream. Call it income or fees, but from an accounting perspective, it's income—something many cryptocurrency fund managers fail to capture. Solana validators typically collect around 5%-7% in staking reward commissions. With the base staking yield hovering around 7%, these delegated tokens generate approximately 0.35%-0.5% in notional value for validators annually. Based on 3.6 million SOL (over $850 million at current prices), this translates to over $3 million in annualized fee revenue, not including any price appreciation or gains from Sol Strategies' own capital. This represents an additional revenue stream, exceeding half of the 400,000 SOL staking rewards it holds, which are generated entirely from other people's funds. However, Sol Strategies' net profit for the third quarter showed a loss of 8.2 million Canadian dollars (approximately $5.9 million). However, excluding one-time expenses such as amortization of acquired validator intellectual property, share-based compensation, and listing costs, its operations are cash flow positive. What truly sets Sol Strategies apart from its competitors is its perspective on Solana. For the company, the product isn't just the Solana token, but the entire Solana ecosystem. This unique perspective is both innovative and strategic, setting Sol Strategies apart in the space. The more delegators Sol Strategies attracts, the more secure the network becomes. As its validators are seen as reliable, this attracts even more delegation. Every user who stakes to a Sol Strategies node is both a customer and a co-creator of its revenue, transforming community participation into a measurable driver of shareholder value. This approach ensures that every participant feels invested in the company's success. This is likely the most important factor giving Sol Strategies an edge over its peers who hold more Solana tokens. Currently, at least seven publicly traded companies control 6.5 million SOL, with a total value of approximately $1.56 billion, or about 1.2% of the total supply. In the race for Solana money management, each firm is vying to become the preferred agent for investors seeking Solana exposure. Each company has a slightly different strategy: Upexi acquires SOL at a discount, DFDV bets on global expansion, and Sol Strategies focuses on a diversified asset reserve. The goal is the same: accumulate SOL, stake it, and sell packaged products to Wall Street. Bitcoin's path to Wall Street was paved by companies like MicroStrategy, which transitioned from a software business to a leveraged BTC fund manager through its highly successful spot ETF. Ethereum followed a similar path through companies like BitMine Immersion, Joe Lubin's SharpLink Technologies, and, more recently, a spot ETF. For Solana, I expect adoption to primarily occur through operating companies within the network. These companies not only hold the assets but also operate validators, earning fees and staking rewards, and publishing quarterly returns. This model is closer to active management than an ETF. It's this combination of net asset value appreciation and real cash flow that is likely to convince investors to invest in this way. If Sol Strategies succeeds, it could become Solana's version of BlackRock. The relationship between Wall Street and Solana will grow even closer in the future. Sol Strategies is already exploring the possibility of tokenizing its own shares on-chain. Imagine STKE shares existing not only on Nasdaq but also as Solana-based tokens, exchangeable in DeFi pools and instantly settled alongside USDC. A Nasdaq-listed stock also traded on-chain would be a bridge that ETFs cannot cross. While this is still speculative, it moves toward blurring the lines between public equity and crypto assets. However, this won't be easy. "Graduating" from Nasdaq also brings new challenges and greater responsibilities for Sol Strategies. Poor validator performance or missing governance steps could result in immediate investor feedback. Sol Strategies' decision to bet on the Solana ecosystem, rather than just the Solana token itself, could present greater risks and corresponding rewards. Solana itself faces network failures and competition from emerging blockchains. If stock investors discover the stock is trading well below net asset value, arbitrageurs may sell, ignoring fundamentals.
Nevertheless, I believe Sol Strategies' Nasdaq listing represents Solana's best opportunity to secure a front-row seat on Wall Street. Can you package on-chain funds into packaged investment products and then aggregate them on Nasdaq? Sol Strategies now shoulders that difficult responsibility.
Alex
Miyuki
Weiliang
Catherine