SUI Tokenomics Raise Major Sell-Off Risks

• SUI blockchain faces tokenomics risks with 50.57% of tokens still locked.
• Insiders hold 15.3% of SUI supply, creating selloff pressure concerns.
• SUI price down 56% from January peak despite technical capabilities.

A new report by Swyftx examines whether SUI can replicate Solana’s historic rally. The analysis highlights tokenomics risks that could limit the blockchain’s price performance.

SUI blockchain launched in May 2023 with a focus on ultra-fast transactions and parallel smart contract execution. The project was built by former developers from Meta’s defunct Diem/Libra payment blockchain.

The report notes that 50.57% of all SUI tokens remain locked. Insiders hold 15.3% of the supply and create concentration risks that increase the likelihood of repeated selloff pressure during rallies.

SUI technical architecture mirrors Solana approach

SUI uses proof-of-stake consensus and the Move programming language. The protocol achieves 390ms consensus latency and handles tens of thousands of transactions per second. SUI has 125 validators with $11.72 billion worth of tokens staked as of October.

According to ChainSpect, SUI has a maximum theoretical capacity of 120,000 transactions per second. This ranks within the top ten fastest blockchains. Ethereum’s Layer 2 networks achieved an all-time high average of 24,192 TPS in early November for comparison.

The low-latency approach keeps bottlenecks to a minimum while processing vast activity volumes and maintaining low fees. This technical foundation resembles Solana’s architecture that aided its rally from below $10 to above $100.

SUI ecosystem shows growth metrics

The SUI ecosystem currently holds 86 projects built by around 1,400 developers. These projects range from wallets and DeFi services to stablecoins, payments, automated market makers, decentralized exchanges and social networks.

Total value locked across the ecosystem exceeded $1 billion. The blockchain reached a peak TVL of $2.63 billion just before the October crypto market crash.

The SUI team launched Nautilus on testnet in mid-April. This upgrade enabled dApp developers to run off-chain computations securely and efficiently.

Developers can now build dApps that access real-time data off-chain, including prices, weather data, Web3 gaming metadata, and KYC/AML verification.

SUI joined Google’s Agentic Payments Protocol in September. This puts the blockchain alongside PayPal, Salesforce and other major firms. The protocol enables AI bots to automate payments and trades.

Stablecoin launch indicates demand

The SUI Foundation launched its native USDsui stablecoin on November 12. The stablecoin is accessible on any SUI-built dApp across the ecosystem.

The blockchain added over $50 million in circulating stablecoins since the launch.

Grayscale launched Grayscale Sui Trust last week. The asset manager’s entry provides institutional investors with exposure to SUI through a regulated investment vehicle.

SUI also partnered with CUDIS to build a blockchain-based healthcare model in South Korea. The fundamentals appear to be strengthening for SUI based on these developments.

Tokenomics present headwinds for SUI price

The locked token supply creates a major challenge for SUI price appreciation. With 50.57% of the 10 billion total supply still locked, future unlocks will add selling pressure.

Insider holdings of 15.3% concentrate ownership in a small group. This concentration increases the likelihood of coordinated selling during price rallies.

SUI reached a peak of $5.35 in early January. The token is now down 56% from that high, currently trading at $1.53.

The insider allocation overhang creates intermittent sell-pressure that limits price rally possibility.

Solana’s price collapsed below $10 following the FTX collapse. The blockchain maintained a foothold above $100 since early 2024, representing a more than 10x gain.

SUI faces a different supply dynamic than Solana experienced during its recovery. The locked tokens and insider concentration create hurdles absent from Solana’s situation.