Solana’s 30% Disinflation Plan Risks Squeezing DeFi Yields
Solana has introduced SIMD-0411, a proposal to double its annual disinflation rate from 15% to 30%. The plan aims to cut the blockchain’s inflation rate from 4.5% to 1.5% over three years. Analysts warn that faster disinflation could shrink short-term DeFi yields, especially for liquid staking tokens like jupSOL. Ignas, a DeFi analyst, said lower inflation and reduced staking rewards might prompt traders to exit positions. Supporters argue that Solana’s disinflation move will reduce long-term selling pressure by limiting new SOL emissions. Helius Labs founder Mert Mumtaz described the proposal as a way to “plug the leaky bucket,” noting that up to 22.3 million SOL could be removed from the emission schedule over six years. Community voting will decide SIMD-0411’s fate. Traders should monitor the vote and adjust strategies as inflation debates continue to drive SOL volatility.
Bearish
The proposal to double Solana’s disinflation rate is likely to exert downward pressure on short-term DeFi yields and staking rewards. Traders relying on liquid staking tokens may reduce positions, triggering sell orders in the near term. This mirrors previous instances where reduced emission incentives led to temporary outflows, such as after Ethereum’s initial base fee burn under EIP-1559. While long-term selling pressure may ease as token supply growth slows, immediate yield compression tends to favor bearish sentiment. Market participants should prepare for increased volatility around the community vote and potential price dips before any sustained recovery.