Standard Chartered: The Bull Case For Solana | Geoff Kendrick

This episode features Geoff Kendrick of Standard Chartered, who unpacks his bank's first Solana (SOL) forecast, exploring how institutional players value Layer 1 blockchains beyond memecoin hype and what strategic shifts could redefine Solana's future against competitors like Ethereum.

Episode Introduction: Valuing Layer 1s Beyond the Hype

• Jack Cuban, the host, introduces Geoff Kendrick, Head of Digital Assets Research at Standard Chartered.
• Standard Chartered recently released its first Solana forecast, estimating SOL at $275 by EOY 2025 and $500 by EOY 2029.
• The discussion aims to delve into the methodologies for valuing Layer 1 (L1) blockchains—foundational networks like Bitcoin or Ethereum—and compare Solana's prospects with Ethereum.

The Genesis of Standard Chartered's Solana Forecast

• Geoff Kendrick explains that the timing for the Solana forecast was driven by a broader effort to expand coverage beyond Bitcoin (BTC) and Ethereum (ETH) to other L1s.
• This expansion provided necessary metrics for comparison, especially given Solana's significant performance in 2023 and 2024.
• Kendrick notes a potential "interesting turning point in 2025" for L1s, particularly for Solana, as it might be moving past "peak memecoin" activity, prompting a need to analyze its next phase.
• Memecoins: Cryptocurrencies often inspired by internet memes or jokes, known for high volatility and community-driven speculation.

Solana's Bullish and Bearish Scenarios

• Kendrick outlines potential future paths for Solana:
  • Bull Case 1: The memecoin trading phenomenon, which has driven significant activity on Solana, continues robustly into 2025-2026. Kendrick states, "I don't really mind where the activity comes from... I want activity."
  • Bull Case 2 (More Positive): Memecoins have stress-tested Solana's network, paving the way for other high-throughput, low-cost applications like social platforms or tokenized equities to gain traction more quickly. This could push SOL prices to $400-$450 this year, though Kendrick views this rapid transition as less likely.
    • Tokenized Equities: Digital representations of traditional stocks on a blockchain, allowing for easier access and trading.
  • Bear Case: Memecoin activity fades without new, substantial use cases emerging to replace it, or competitors like Sui capture this new activity. This could lead to price declines, though Kendrick sees this as low probability.
• Kendrick's Base Case: A transitional period where memecoin-driven activity subsides, and it takes a year or two for new use cases like social or tokenized equities to mature. This could lead to market frustration and SOL underperforming while still appreciating in price.

Debating the Sustainability of Memecoin Volume

• Jack Cuban questions the assumption that memecoin volume is unsustainable, citing Blockworks Research data showing increased trading volume on Solana from $45 billion in March to $75 billion in May 2024, surpassing mid-2023 peaks.
• Geoff Kendrick clarifies he has no issue with memecoin trading itself but points to two concerns:
  • The "pass-through" of memecoins from platforms like Pump.fun (a platform for easily launching memecoins on Solana) to larger exchanges like Radium (a leading Automated Market Maker and liquidity provider on Solana) has weakened, with fewer new coins achieving significant traction compared to early 2024.
  • Kendrick introduces his "GDP" metric (total fees paid by end-users to applications on a chain). He argues that the market appears to be discounting Solana's memecoin-driven activity more heavily than activity on chains like Ethereum, Avalanche, or BNB Chain when comparing market cap to this "GDP." This suggests the market itself doubts the sustainability or quality of this activity for valuation purposes.

Solana's Transition to New Use Cases: What's Next?

• Jack Cuban probes for a more concrete thesis on which applications will drive Solana's next growth phase, expressing skepticism about crypto-social ventures.
• Geoff Kendrick believes tokenized equities represent an "easier win" for Solana due to its high-volume, low-transaction cost capabilities, catering to retail investors globally who lack access to traditional markets like NASDAQ.
• He sees a future for decentralized social media but acknowledges the difficulty in predicting winners and timing. "Is it even one of the social apps that are around now? I mean, who knows?"
• Regarding stablecoins, Kendrick notes Ethereum and Tron currently dominate, which makes sense for TradFi (Traditional Finance) due to trust and familiarity with Ethereum. However, for faster, cheaper transactions, especially for retail, Solana could become a key player.

Valuing L1s: The "GDP" Metric and Its Implications

• Geoff Kendrick elaborates on his preferred valuation metric: "GDP," defined as the sum of fees paid by end-users to applications built on a blockchain.
• Rationale for GDP Metric:
  • It yields somewhat comparable market cap to "annualized GDP" ratios across different chains (e.g., figures in the 50s-100s range), unlike more volatile raw fee metrics.
  • It aligns with how equity analysts might value companies based on risk profiles (e.g., a diversified chain might get a higher "P/E" equivalent than one reliant on a single, risky use case like memecoins).
  • It draws an analogy to a country's economy, where application activity is like economic activity, and protocol fees are like taxes.
• Jack Cuban questions if app revenue is the most direct measure for L1 token value capture, suggesting protocol-level fees (income to validators/stakers) might be more relevant, even if volatile.
• Kendrick concedes that over time, especially as application take rates change, direct fees will matter more. He notes that L2s (Layer 2 scaling solutions built on top of L1s) are currently "minting it from a cash perspective," potentially signaling a future where value accrues more to applications than L1s.

Solana's Challenge: Retaining Value Amidst App Growth

• The discussion touches on Solana's strategies, like application-specific sequencing, to ensure value accrues to the L1 rather than being entirely captured by successful applications that might otherwise launch their own chains.
• Geoff Kendrick observes a trend of blockchain foundations increasingly adopting corporate-like communication strategies to articulate their value proposition to investors, especially those from traditional finance.

Near-Term Price Dynamics: Ethereum vs. Solana

• Geoff Kendrick presents a nuanced forecast: Bitcoin to outperform Ethereum, and Ethereum to outperform Solana in the near term. He projects ETH to $4,000 by year-end.
• Bitcoin's Strength: Driven by continued TradFi inflows as global access to Bitcoin ETFs and similar products improves. Kendrick targets $200k for BTC by EOY 2025 and $500k by January 2029.
• Ethereum's Relative Position: Kendrick argues that Ethereum has "mismanaged" several upgrades—like the shift from Proof-of-Work (a consensus mechanism requiring computational power) to Proof-of-Stake (a consensus mechanism based on staked capital) and the Dencun upgrade (which included EIP-4844, "Proto-Danksharding," significantly lowering data fees for L2s)—leading to value leakage to L2s. However, he believes much of this is already priced in.
• Solana's Near-Term Challenge: Post "peak memecoin," Solana faces uncertainty about its next major growth driver. Kendrick suggests, "Salana's in this space which is you know what is the chain actually for what's it about and in a relative sense that feels more tricky for me for the next two or three years."

Catalysts and Headwinds for Ethereum and Solana

• Jack Cuban questions the catalysts for Ethereum, given the persistent L2 value capture issue.
• Geoff Kendrick believes the current "altcoin season" will be different, dominated by institutional flows, which may not lift all boats equally.
• Positive developments for Ethereum include the Ethereum Foundation and the new "Etherealize" initiative showing a greater willingness to engage externally.
• A potential "lucky win" for Ethereum could be its continued dominance in stablecoins and tokenized RWAs (Real World Assets), especially as US regulation (e.g., a potential stablecoin bill) clarifies. Kendrick notes, "the only use case that is existing from the real world in crypto so far which is stablecoins... is 2/3 on Ethereum."
• Jack points out that major stablecoin issuers like Circle, while benefiting Ethereum, also have strong ties to L2s like Base (Coinbase's L2), which again highlights the value capture dilemma for Ethereum L1.

Institutional Perception: The Ethereum Advantage

• Jack Cuban asks why Ethereum is often perceived as more "institutional" or "serious" than Solana.
• Geoff Kendrick attributes this to a "self-fulfilling prophecy":
  • Ethereum's longer history (nearly 10 years) means greater familiarity among traditional financial institutions.
  • The prevalence of memecoins on Solana reinforces a perception of it being less suited for serious institutional applications.
  • Kendrick states, "if I was to take something in my bank today and say we want to build something on blockchain in smart contract space, the automatic response on the other side of the table would be, well, you're going to do that on Ethereum or one of the L2s, right?"

Can Solana Bridge the Perception Gap?

• Jack Cuban questions if Solana's superior performance (speed, cost) can eventually overcome these perception issues and attract institutional adoption.
• Geoff Kendrick agrees this is possible, especially for use cases requiring high transaction throughput that Ethereum L1 cannot handle, such as fully on-chain exchanges or large-scale tokenized equity trading. "That looks like Salana or a Salana competitor."
• However, he cautions that if high-volume memecoin trading continues to dominate Solana's image, it could deter institutions from choosing Solana for "golden goose" opportunities like tokenized equities due to the perception problem. The way the Solana ecosystem manages this balance will be critical.

Conclusion: Navigating Perception and Utility for L1 Dominance

• This discussion underscores that while Solana's raw performance is compelling, its path to sustained institutional adoption involves navigating complex valuation metrics, managing the narrative around its primary use cases, and overcoming entrenched perceptions. For investors and researchers, tracking Solana's ability to transition from memecoin dominance to broader, high-value applications while competing with Ethereum's established institutional trust will be key to understanding its long-term trajectory.