Is this Solana rally underpinned by fundamentals, or is it just riding the crypto market hype?
We know cryptocurrencies have offered supernatural returns. But Solana’s supersonic climb has been a record-breaker.
Solana was launched in April 2020, and in just 18 months, it has rallied over 18 000%. The only even more impressive statistic is the rate of development on the Solana blockchain, which has overtaken rivals.
SOL, the cryptocurrency linked to the Solana network, has jumped into the world’s top 10 largest cryptocurrencies amid optimism that its blockchain infrastructure could be a long term competitor to Ethereum, the world’s second-largest cryptocurrency.
But is this really the case?
Or is it just going up because of the renewed crypto market hype?
Let’s break it down.
What is Solana?
Solana is a blockchain network that seeks to develop an ecosystem of cryptocurrency-powered products and services.
Solana is different to Bitcoin – in that it’s not trying to become digital money or a digital competitor to gold – but offers similar features to Ethereum.
It differentiates itself from Ethereum’s network by providing far faster transaction times, lower fees and a programming capability that focuses on flexibility.
For reference, Solana’s network for reference, Solana can do up to 1,000,000 transactions for under $10, whereas Ethereum and Bitcoin cost more than $7-8 per transaction. Solana can also handle over 50,000 transactions per second, more than Ethereum and Bitcoin combined.
Developers can also write and launch customisable applications in multiple programming languages on the Solana blockchain.
Due to its speed – which Solana claims to be the fastest blockchain in the world – low cost and flexibility, we have seen Solana become one of the fastest-growing ecosystems in crypto. Solana currently has over 180 projects and 400 in the pipeline. These projects span areas such as DeFi, NFTs, Web3 and more.
Solana’s native cryptocurrency, SOL, is used to pay for executing programs and sending transactions.
What has spurred this Solana rally?
After the hotly anticipated Ethereum upgrade last month, many were hoping that it would solve Ethereum’s high transaction fee issue, but all the evidence has pointed to the contrary.
With Ethereum’s high fees and network congestion still not fixed, the month of August saw many Ethereum competitors or “Ethereum killers”, as they’re known, gain momentum.
Ethereum’s network is clearly feeling the pressure
Over the last five months, we’ve seen Ethereum lose over 20% of its dominance in the smart contract crypto category.
This means that, for the first time ever, developers are not only looking for alternatives to Ethereum to create their apps, but they are actively using them at an accelerating rate.
Built for speed and accompanied with ultra-low fees, Solana seemed to be the perfect fix to Ethereum’s shortcomings. Unlike other “Ethereum killers”, such as Cardano and Polkadot, Solana doesn’t just promise fast transaction throughput, but it’s delivering it (+ 50,000 transactions per second).
Because of this, Solana has been amassing remarkable gains over the past few months. Therefore the rally has been underpinned by fundamentals and not just hype.
Yes, Solana’s run might be partly due to hype and a renewed NFT interest, but you have to ask yourself why?
The reason is simple: Solana’s fundamentals (lower fees, transaction time and transaction throughput) are becoming increasingly favoured by NFT creators.
What are NFTs?
Well, NFT stands for Non-Fungible Token.
To understand what they are, you need to understand what “fungibility” means.
Fungibility is a simple concept that basically refers to items that are replaceable for the exact same item.
Therefore, Non-fungible (the opposite of fungible) means that it’s unique and can’t be replaced with something else, like a one-of-a-kind trading card or the Mona Lisa painting. If you traded either the card or the painting, you’d receive something completely different in return.
Thus, NFTs are “one-of-a-kind” assets in the digital world that can be bought and sold like any other piece of property.
The digital tokens can be thought of as certificates of ownership for virtual assets (such as in-app items and digital art) or physical assets (such as real-life paintings and even houses).
With the NFT market hitting new highs in 2021, with more than 30x the sales of 2020, you can understand why the blockchain networks facilitating these transactions have received increased attention.
Below we can see how Solana has outperformed Bitcoin over the past 12 months.
A R1,000 investment in Solana would have translated into +R70,356 over the past 12 months.
This is a substantial return when compared to basically any alternative investment. In fact, this return on investment is over 18x greater than if you had invested in Bitcoin over the same period (+R3,804).
Is Solana still a good investment?
With the recent pullback in the market, many may see this as an opportunity to get into Solana as it takes a much-needed break from its impressive run.
You may see this as a generational buying moment in an emerging asset class or one speculative bubble.
Either way, diversification is always the smart thing to do when it comes to investing. Without giving investment advice, do some research on smart contracts and Solana, and form your own view on what the future holds.
If you see a big future for smart contracts and blockchain technology, then it would be worthwhile including some Solana in your crypto portfolio.
Where do I buy Solana?
Cape Town based crypto investment platform Revix (www.revix.com), which is backed by JSE listed Sabvest, will be one of the first platforms in South Africa to offer Solana as a standalone cryptocurrency investment option. Revix will be offering Solana from the 10th of September with an enticing fee-free promotion.
Revix will offer zero buying fees on Solana purchases when using ZAR and GBP for one week, starting on the 10th of September and ending on the 16th of September 2021.
Revix also offers multiple standalone cryptocurrencies, from Bitcoin, Ethereum to Uniswap and Polkadot and many others.
Through Revix, you can also gain access to their ready-made “Crypto Bundles”. Their Bundles enable you to effortlessly own an equally-weighted basket of the world’s largest and, by default, most successful cryptocurrencies without having to build and manage a crypto portfolio yourself.
They’re like the JSE Top 40 or S&P 500 but for crypto.
For more information, visit www.Revix.com.
Revix brings simplicity, trust and great customer service to investing. Its easy-to-use online platform enables anyone to securely own the world’s top investments in just a few clicks.
Revix guides new clients through the sign-up process to their first deposit and first investment. Once set up, most customers manage their own portfolio but can access support from the Revix team at any time.
This article is intended for informational purposes only. The views expressed are not and should not be construed as investment advice or recommendations.
This article is not an offer, nor the solicitation of an offer, to buy or sell any of the assets or securities mentioned herein. You should not invest more than you can afford to lose, and before investing, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.