Why Has NEAR Suddenly Attracted Institutional Investment? AI Layer 1 Narrative and On-Chain Data Validation

NEAR Protocol broke away from mainstream crypto assets in May 2026, triggering a distinct market rally and prompting investors to reexamine its underlying fundamentals. According to Gate market data, as of May 27, 2026, the NEAR price surged from its early May low of $1.24 to over $2.50, with its market cap climbing back above $3 billion. Meanwhile, both Bitcoin and Ethereum experienced significant capital outflows—CoinShares reported that global crypto funds saw net outflows of $1.47 billion in the last week of May, marking the second consecutive week of net withdrawals and totaling $2.54 billion over two weeks. Against this backdrop, NEAR emerged as one of the primary beneficiaries of institutional portfolio rotation.

How Is Institutional Capital Rotating?

To assess the nature of a market rally, it’s essential to analyze the structural flow of capital. Late May saw three notable trends in institutional activity:

First, defensive retreat at the aggregate level. Crypto funds recorded net outflows for two consecutive weeks, totaling $2.54 billion, with the US market as the main source. This signals a further spread of global risk aversion.

Second, selective accumulation at the structural level. Despite overall outflows, assets like XRP, NEAR, and Solana attracted net inflows. Institutions aren’t exiting entirely; instead, they’re shifting themes and reallocating positions.

Third, narrative-driven concentration at the thematic level. Institutional funds are increasingly targeting privacy coins and AI tokens, with NEAR singled out as a representative beneficiary.

Alongside these capital flows, deep changes in portfolio composition are underway. On-chain data shows that venture firms like a16z and Tiger Global Management collectively hold 14.38% of NEAR’s total supply, a stake accumulated since 2019. Grayscale’s AI-themed portfolio also includes NEAR, TAO, and RENDER, offering institutions diversified exposure to this sector.

Additionally, on-chain data reveals a whale leveraged long 2.34 million NEAR (about $6.45 million) within 10 hours, using 10x leverage and planning further accumulation, indicating strong bullish sentiment. Another whale wallet holds over $4.8 million in NEAR, alongside STRK, TON, and other AI and infrastructure assets as part of its core allocation.

These capital movements suggest a fundamental conclusion—institutional allocations to NEAR are not short-term speculation, but part of a medium- to long-term strategic positioning based on the AI narrative. The continued holdings by a16z and Tiger Global, two of the most active tech investors in primary markets, serve as implicit endorsements of NEAR’s technical roadmap. However, concentrated institutional holdings also pose potential sell-off risks, which warrant ongoing monitoring.

Where Does NEAR’s AI Narrative Originate?

The primary driver behind NEAR’s latest rally is the market’s revaluation of its strategic position as an "AI Layer One." Understanding this requires examining three aspects: founding DNA, technical architecture, and product deployment.

NEAR co-founder Illia Polosukhin is a prominent figure in the AI space. He’s one of eight co-authors of the 2017 Transformer paper, "Attention Is All You Need"—the foundation for today’s leading large language models like ChatGPT, Claude, and Gemini. This academic pedigree gives NEAR’s AI narrative unique legitimacy—it isn’t just "slapping on an AI label," but embeds AI expertise within the founding team’s knowledge base.

At the Buidl Asia conference in April 2026, Polosukhin publicly stated that NEAR Protocol began as an AI project, later developing blockchain infrastructure to facilitate data collection and reward distribution in AI model training. He further argued that there’s a critical mismatch between current blockchain infrastructure and the needs of AI agents managing personal finances—traditional blockchains are designed for "full transaction transparency," but when AI agents execute asset transfers, DeFi investments, and portfolio management on behalf of users, public wallet activity and transaction history create unacceptable security and privacy vulnerabilities.

On the technical side, NEAR’s core is the Nightshade sharding technology, which divides network state into multiple parallel shard chains. In May 2026, NEAR achieved a publicly verifiable milestone of 1 million TPS, powered by Nightshade’s architecture. Network activity is robust, with daily active addresses around 838,000 and daily transaction volume about 1.7 million—ranking alongside BNB Chain and second only to Tron among Layer 1 chains. The 2026 roadmap includes a dynamic resharding upgrade slated for June, enabling the network to automatically scale shard numbers as needed for self-expansion.

On the product front, Near.com’s super app launched on February 23, 2026, integrating cross-chain swaps, privacy tools, smart contract management, and AI capabilities. It allows a single account to manage assets across more than 35 chains, supporting privacy-protected transactions. NEAR AI Cloud and Private Chat tools have been integrated into apps like Brave Nightly, serving a broad user base. Late May saw the rollout of Confidential Intents, powered by TEE bridges and privacy shards, which protect the routing path, counterparties, and economic relationships in cross-chain transfers. NEAR’s official data shows that nearly half of swap volume now uses privacy routing.

On the protocol revenue side, NEAR generated about $15.6 million in the first four months of 2026, with analysts projecting annual revenue between $40 million and $60 million. NEAR Intents’ cumulative cross-chain transaction volume has surpassed $10 billion, with $2.15 billion recorded in the past 30 days, completed by over 540,000 unique addresses.

NEAR’s AI narrative is backed by substantial "technical density"—unlike some projects that rely on slogan-driven marketing, NEAR has a concrete product matrix (AI Cloud, Confidential Intents, Near.com) and verifiable technical progress (sharding expansion, privacy features, revenue growth) forming a chain of evidence for its story. However, it’s important to note that there’s still a significant gap between being "AI-friendly infrastructure" and achieving "mass adoption of AI agents," which depends on the broader pace of the AI agent economy.

Comparing NEAR’s Competitive Landscape with Solana and Sui

NEAR’s positioning as an AI Layer One doesn’t exist in isolation. Within the Layer 1 space, Solana and Sui are its most frequent competitors, each representing distinct technical paths and market positioning.

On-chain Data Comparison

Key metrics show the three chains diverged sharply in the first half of 2026:

• Solana: Daily active addresses ranged from 2.03 million to 2.89 million. May data shows on-chain activity dropped 42% from February’s peak of 5.01 million, marking the lowest level in four months. DeFi total value locked has also come under pressure.
• NEAR: Current market cap is about $3.57 billion, with daily active addresses around 838,000 and daily transaction volume about 1.7 million. While its user base is smaller than Solana’s, NEAR’s on-chain activity and transaction volume are steadily expanding.
• Sui: Monthly stablecoin transaction volume exceeds $100 billion, with active developers up 219% year-over-year and over 500 active projects in the ecosystem.

Technical Approach and Strategic Positioning

The core differences among the three chains can be summarized as follows:

Developer data sources: NEAR has over 1,700 active developers and more than 800 projects. Monthly active NEAR developers exceed 1,200. Solana and Sui figures are compiled from public documents and third-party platforms.

Logic of Differentiated Competition

Strategically, competition has shifted from "who’s faster, who’s cheaper" to differentiation:

• NEAR’s moat lies in the completeness of its AI-native narrative and its early lead in privacy execution. Polosukhin’s academic background, Nightshade’s adaptability to AI agent workloads, and the deployed Confidential Intents feature form a combination that’s hard for other chains to replicate in the short term.
• Solana’s advantage is scale—its massive user base, mature DeFi ecosystem, and institutional-grade financial products give it overwhelming liquidity depth. However, its recent drop in on-chain activity is a concern.
• Sui’s breakthrough is developer growth—a 219% annual increase makes it one of the fastest-growing chains for developers, and the Move language’s security features attract teams from the Solidity ecosystem.

The three chains aren’t locked in a zero-sum "winner-takes-all" battle, but are building strengths across differentiated tracks: AI agents, high-frequency trading, and payment settlement. NEAR’s main competitive challenge isn’t direct technical outperformance, but the cyclical volatility of sector narratives—if the AI agent economy fails to materialize as expected, NEAR’s narrative premium will be reassessed.

Is the Rally Driven by Fundamentals or Sentiment?

The sustainability of any rally depends on whether it’s driven by fundamental improvements or speculative sentiment. NEAR’s latest surge is fueled by both:

Fundamental Drivers:

• Tokenomics: The October 2025 network upgrade reduced the maximum annual inflation rate from 5% to about 2.5%. Although early community votes didn’t meet the threshold, the upgrade was successfully implemented on October 30, 2025, cutting annual new token issuance by nearly 60 million.
• Ecosystem Data: NEAR Intents cross-chain volume surpassed $10 billion, and protocol revenue reached $15.6 million in the first four months of 2026. Analysts expect annual revenue to grow to $40–60 million.
• Institutional Access: Bitwise filed for a spot NEAR ETF with the SEC in May 2025. Grayscale submitted an S-1 in January 2026 to convert Grayscale Near Trust into a spot NEAR ETF, ticker GSNR.
• Technical Deployment: Key features like Confidential Intents and Confidential Payments have moved from roadmap to live products, with USDC integration supporting the AI Agent Market.

Sentiment Drivers:

• In late May, BitMEX co-founder Arthur Hayes publicly highlighted NEAR as a top crypto asset, predicting it could achieve roughly 20x growth by 2027.
• Nvidia’s earnings report revived the AI sector, significantly boosting risk appetite for AI-themed assets.
• NEAR’s 24-hour trading volume spiked, and the price broke key resistance levels, triggering a short squeeze. Media reports indicate over $9.85 million in short positions were liquidated, with buybacks further driving up the price.

Conclusion

NEAR’s latest rally is powered by a combination of three factors: proactive institutional allocation, market recognition of its AI Layer One narrative, and supply-side improvements from tokenomics optimization. Unlike the "Ethereum killer" narrative of the 2021 cycle, NEAR’s current strategy is more focused—it’s no longer aiming to be a general-purpose Layer 1 competitor, but is building differentiated advantages in the AI agent economy niche.

On-chain data shows NEAR’s activity, protocol revenue, and ecosystem adoption are all trending upward, providing fundamental support for its narrative. However, from a valuation perspective, the current price already reflects high growth expectations. Whether NEAR can continue its upward trajectory depends on the adoption rate of core products like Confidential Intents, the effectiveness of the dynamic resharding upgrade, and the overall pace of the AI agent sector.

In its competition with Solana and Sui, NEAR’s moat isn’t absolute performance metrics, but the completeness of its AI-native narrative and its early lead in privacy execution. The sustainability of this advantage will be the key variable determining NEAR’s competitive position in the next cycle.