A Deep Dive into Solana’s Upcoming Jupiter Airdrop

Following the hugely successful Jito airdrop (peak value over $450 million), the JUP airdrop is coming. JUP is the token of Jupiter, a key DeFi aggregation platform on Solana.

This airdrop is scheduled to start on January 31st and is the most anticipated airdrop in Solana’s history.

What makes Jupiter special? Will JUP live up to its promise? At what price should we sell? Or when should we buy more?

In this article, I will take you through everything about the Jupiter product line, future plans, and potential opportunities for JUP airdrops.

1. Jupiter: A one-stop DeFi shop on Solana

Since its launch in October 2021, Jupiter has been working hard to build the best decentralized trading experience on Solana. The platform achieves this vision by aggregating various DeFi functions into a single application to provide the most seamless user experience.

While Jupiter was initially conceived as a swap engine, the protocol has evolved significantly to offer a variety of different products for different types of users, including: dollar-cost averaging (DCA), limit orders, perpetual contract trading, and most recently, a launch platform.

In my opinion, the DCA tool is probably the best product in DeFi right now.

Jupiter’s growth in 2023 has been outstanding, with monthly trading volumes surging approximately 10x — from $650 million in January to $7.1 billion in December. Notably, monthly trading volumes exceeded $16 billion in November, a record high, following the announcement of the JUP token.

In 2023, Uniswap's monthly trading volume was as low as US$17.4 billion and as high as over US$70 billion.

Currently, Jupiter has a trading volume of over $66.5 billion and has processed over 1.2 million transactions, becoming a key layer of the Solana ecosystem. It accounts for more than 70% of the organic trading volume of Solana DEX, becoming a trusted reference platform for Solana retail traders.

Despite this, Jupiter continues to innovate, improve existing features, and launch new products based on its three main business models:

• Provide the best user experience

• Maximizing Solana’s Technical Capabilities

• Improving Solana’s overall liquidity situation

Given its unique positioning, I believe Jupiter is betting on two things:

• Solana’s long-term adoption: 2023 is the year of Solana’s rebirth as the Solana network activity increases. I believe Solana has the ability to continue to grow and take a larger share of the L1 market. This will be a positive for Jupiter.

• DeFi is going mainstream: the future of trading is on-chain, and even CEOs of large traditional financial institutions like Larry Fink have started talking about the “tokenization of every financial asset.” So it seems reasonable to think that Jupiter can facilitate this transition.

The recently announced JUP token is a further step in Jupiter’s strategy in this direction.

2. JUP: The symbol of DeFi 2.0

The JUP token marks a major milestone in the development and spirit of Jupiter. Just as Uniswap’s governance token UNI symbolized the first wave of DeFi on Ethereum, JUP aspires to embody the essence of DeFi 2.0 on Solana.

As a governance token, JUP will allow holders to influence decisions about key aspects of the ecosystem, including voting on key aspects of the token itself, such as the timing of initial liquidity provision, future distribution releases, and important ecosystem initiatives.

The main goals of the token are:

• Invigorate the Solana ecosystem by attracting new capital flows and users.

• Creating momentum for launching new ecosystem tokens: JUP will serve as a catalyst for launching more ecosystem tokens.

• Build a strong distributed JUP community.

As stated by pseudonymous co-founder Meow, JUP aspires to build “the most efficient, forward-thinking, decentralized, non-internal voting DAO ever created.”

Additionally, the utility of JUP will evolve over time, and it will depend on what direction the community takes it. Potential uses for the token could be:

• Reduce transaction fees for perpetual futures contracts.

• Optimize access to and distribution of publishing platforms.

• Automated Market Maker (AMM) Fee Sharing.

However, Meow made it clear that they will not start the revenue sharing model until the user base expands at least 10 times.

3. Token Economics

The token economics of a project will reflect the spirit of that project, and Jupiter's vision is to keep it as simple as possible. With a maximum supply of 10 billion JUP, tokens are evenly distributed between two cold wallets - the team wallet and the community wallet. The team wallet will be used for the current team, treasury, and liquidity supply allocations, while the community wallet is for airdrops and various early contributors.

4. Airdrop Details

The first round of airdrops is scheduled for January 31st, and 10% of the total supply will be distributed to the community first. The details of the airdrops are as follows:

• Equal distribution among all wallets (2%): 200 million tokens will be distributed equally to all users who have used Jupiter before November 2, 2023, equivalent to approximately 200 JUP per user.

• Tiered scoring allocation, scores are based on the unadjusted amount (7%): The specific allocation is as follows:

Level 1 allocation: 100,000 tokens will be allocated to the first 2,000 users each (estimated transaction volume exceeds 1 million)

Secondary distribution: The next 10,000 users will each receive 20,000 tokens (estimated transaction volume exceeds 100,000)

Level 3 distribution: The next 50,000 users will each receive 3,000 tokens (estimated transaction volume exceeds 10,000)

Level 4 distribution: The next 150,000 users will each receive 1,000 tokens (estimated transaction volume exceeds 1,000)

• Discord, Twitter, and Developer Community Members (1%): 100 million tokens will be distributed to the most valuable contributors and community members.

There will be three more rounds of airdrops in the future.

5. JUP Token Valuation — Comparison with JTO

A common problem with new airdrops is determining the fair value of the tokens.

While there is no way to directly answer this question about JUP, one possible approach is to compare it to the most recent airdrop on Solana, namely the JTO token.

JTO is the governance token of Jito Lab, a liquidity staking platform built on Solana. The airdrop distributed 10% of the JTO supply to approximately 10,000 users. The airdrop amount once exceeded $450 million.

JTO Price Analysis

Using the Binance first quote (after initial market volatility) of $2.13 as the reference price, this is the approximate price action after the JTO launch:

Here are some trends that emerge from the table:

• Initially, the token price fluctuated wildly on the first trading day, rising from $1.74 to $3.77. Furthermore, the trading price was above the initial offer price of $2.13 83% of the time.

• Furthermore, it is worth noting that the first week of trading was indeed positive for JTO. The token traded above its reference price 97% of the time, reaching an all-time high (ATH) of $4.45.

Now looking at the percentage of time spent in different price zones, we can see that JTO did not spend too much time at its all-time high, exceeding the reference price of $2.13 by more than 2x only 18% of the time.

Furthermore, we see that the JTO price never dropped more than half of its initial quote. Moreover, it dropped more than 25% only about 8.6% of the time.

Although the price trend of JUP may not be consistent with that of JTO, you can make some assumptions:

• JUP is expected to be highly volatile on its first trading day, which may provide opportunities for short-term traders.

• The launch of JUP is likely to generate a lot of excitement, likely reaching a local peak in the first week of trading, with the price rising rapidly to more than double the initial offer price, which could also mean that it is time to sell.

• Conversely, a decline of more than 50% from the initial quote may be seen as a buying opportunity.

6. “Overbought” indicator — JTO FDV / LDO FDV ratio

Jito is similar to the Lido protocol. The key difference between the two is that Jito runs on Solana, while Lido is on Ethereum. Therefore, a reasonable way to price the token when JTO is released is to look at the relationship between the JTO FDV (fully diluted valuation) and the LDO (Lido governance token) FDV. This comparison allows us to measure how the market values ​​JTO relative to similar products on Ethereum.

Here is the JTO FDV / LDO FDV ratio since the JTO was released:

We observed that after the release of JTO, its FDV quickly rose above the LDO FDV, reaching a ratio of nearly 1.9, almost twice the LDO FDV. However, this surge was likely driven by optimism, and the market quickly pulled JTO back to a lower level. In the following weeks, the FDV ratio of JTO to LDO showed a downward trend, falling to 0.4, and then rebounded strongly to around 0.7-0.8. So far, the market seems to have finally determined a fair value within this range, which is very close to the average of the past few months (0.9).

From this we can conclude that for JTO, a ratio over 1.6 is a clear overbought signal, while 0.4 is a strong oversold signal.

7. Apply this assessment to JUP

Just like LDO corresponds to JTO, we also need to find a comparison anchor for JUP on Ethereum.

Given that Jupiter is the largest decentralized exchange (DEX) on Solana, with features such as automated market makers (AMMs), DCA, perpetual contract trading, and launch platform opportunities, it is challenging to find a comparable project on Ethereum. Therefore, I think Uniswap, dYdX, and DAO Maker combined are almost the closest to JUP. Therefore, their fully diluted valuations (FDVs) can be combined for comparison. At the time of writing, the total FDV of their respective tokens (UNI, dYdX, and MKR) is about $10.04 billion.

We can use this comprehensive FDV value, as well as the key values ​​of the JTO/LDO FDV ratio, to evaluate the JUP price in different situations.

By using the same relative valuation analysis, we can arrive at these key price levels to further optimize our airdrop decisions:

However, it is worth noting that JTO has a relatively high daily Beta value of 0.86 relative to Solana. Therefore, JTO’s price action is closely correlated with Solana, and JUP is likely to follow the same pattern.

At the time of writing, Solana is trading at $80-82, down from the $120-130 level, which is a drop of over 30%, indicating that market conditions may not be as optimistic as they were during the JTO airdrop.

When comparing the price of SOL in the month before the JTO airdrop to the recent past, it is clear that market conditions have changed. Therefore, it seems reasonable to assume that this could have a negative impact on the price of JUP.

8. Potential airdrop rewards

Can this airdrop be as large as JTO? Let’s analyze it together.

If we look at the different returns for each tier of distribution, we can deduce the potential airdrop potential of JUP at a given price:

In comparison, here is the return of JTO at different tranches and different key prices:

Even at its all-time low of $1.323, the JTO airdrop sizes at all levels are higher than the potential returns of a JUP airdrop (even at a JUP price of $2).

To put this into context, in order for the lowest tranche of JUP to match the lowest tranche of JTO at its historical low price, JUP would need to trade at over $20. This would imply a FDV of $200 billion, which is a completely unrealistic number.

However, it must be emphasized that the JTO airdrop is focused on 10,000 users, while JUP is distributing tokens to nearly 1 million users. This means that JTO will have many buyers waiting to buy in, while JUP is widely distributed, so there may not be many buyers at the beginning.

The market also did not expect JTO to end up with such a high market cap, and it seems that expectations for JUP were also very high, so this is also a key difference that should be considered. When everyone expects the same thing, it rarely happens as expected.

So, while the JUP airdrop may not offer as significant returns to individual users as the JTO airdrop, its broad impact on the larger user base makes it one of the most important airdrops on Solana to date.

It is very likely that we will see a significant increase in on-chain activity following the JUP airdrop. This will be an incentive for many, especially for degens, to go further up the risk curve and chase higher returns with what they perceive as “free money” from JUP.

As a final note, SOL could also benefit from increasing buying pressure from JUP profit-taking users, but clearly the market is far less bullish in the short term, so it is difficult to gauge how SOL will perform over shorter periods of time.