Solana's ascent
Solana’s return to prominence leads one to ponder why the ecosystem is performing so well. After all, it has not been that long since the darkest moments.
This network certainly has many strengths, but there is also a lot of exaltation operating behind the scenes. So let’s get our heads together and understand why Solana and coin SOL are performing the way they are.
Note: The data you will find in the article are updated two to three days earlier than published, so they may vary. However, the observations we will bring remain valid.
Speculation and hype
Let us divide the motivations behind the Solana blockchain push into two macrocategories: speculation and hype; project value. Let’s start with the first point.
The general return to positive territory after a difficult bear market has involved almost all projects. Solana is one of them: from the All-Time high of late 2021 (about $250 per specimen), the coin found itself worth less than 10 in late 2022 and early 2023. This was an extreme collapse, suggesting the worst.
After all, the network in question has not had it easy. In fact, in addition to the many reliability problems, which are manifesting themselves today with far less frequency than in the past, we must remember the bankruptcy of FTX and Alameda Research, which were closely linked precisely to Solana.
The network team did not let the failure get them down and responded to the difficulties by working even harder and improving in all respects. Today we are looking at a modern and functional blockchain, but it still requires some adjustments to be perfect.
At a time when some interest in cryptos has returned, SOL has not stood idly by. After a 2023 marked by consolidation, a steep climb to current values began around autumn. Behind it, however, in addition to the undeniable value of the project, there is also a lot of speculation. Investors, especially savvy ones, know well how the market moves and had not forgotten the potential of this network. This started the growth, fueled later by the many nonexperts who joined the seemingly winning horse.
The hype component is therefore very substantial and brings with it not a few problems. For we know that, somewhat like leverage, it amplifies movements regardless of market direction: powerful rises due to FoMO can have sudden collapses as the opposite.
Adding to this mechanism is the fact that memecoin mania has exploded on Solana, spearheaded by the arrival of BONK (also received in airdrop by buyers of the now untraceable Saga smartphone). These tokens with no intrinsic value helped pump up DEX trading volumes and interest in SOL, a cryptocurrency essential to pay network gas fees.
The above is not meant to argue that SOL is there by accident and that it is all about speculation, quite the contrary. However, we still need to move cautiously, especially with marked extensions on the chart.
Real-time SOL/USDT value by TradingView, the best platform for technical analysis.
Solana's value
But let’s talk a bit about the value of this project by putting market turmoil aside.
The network has some no small strengths.
First and foremost there is speed, with a number of transactions per second that ridicules that of other chains, including even Ethereum. Solana has always placed a lot of emphasis on performance, perhaps too much so given the not a few problems it has experienced. Today, however, it is all a bit different and balances seem to have been found to ensure its usability without jamming.
The potential to become a very rapid medium of value exchange is very much there, and we have to join another no small peculiarity: the low gas fees. A transaction in this environment generally costs a few thousandths of a SOL, or cents on the dollar. In contrast, in times of congestion, Ethereum is a chain “for rich people,” and even layer-2s like Optimism and Arbitrum can charge a few dollars. Or, other networks cost little, but cannot offer such immediate performance.
These considerations are then combined with a complete ecosystem with well-developed decentralized applications. Recently, exchange volumes have increased further and TVL DeFi has exceeded $4,8 billion (little compared to Ethereum’s over $50 billion, but still growing).
How much will Solana be worth?
We close with a look into our crystal ball.
Those of you who follow us know that we try not to get off the hook with predictions that leave time for them, so room only for lucid considerations.
On the one hand, we can say that the coin is moving well and reflects the positive trend of its native network. The general resurgence of interest in cryptocurrencies affects all projects a bit, although some are performing better than others; the Solana galaxy is one of those going strongest.
Growth seems solid to us, and even the technical side does not leave the perplexities of yesteryear, even if maximum reliability has not been reached.
It would seem, therefore, that all the cards are in place to move in the right direction.
However, we must also take into account the excessive speculation and exaltation. In addition, cryptos have literally exploded in a very short time; for many we enter unknown territory (see bitcoin) and it is hard to imagine what will happen.
In short: SOL can grow a lot more, as well as take any market hits and leave so much value on the street. To minimize risk, we therefore seek to:
- Invest without looking for easy and immediate profits (it’s called gambling!);
- Analyze pros and cons and put them in context with the risks we want to take;
- Consider that the charts are quite large, but they could still go up further;
- Establish a plan B in case there are difficulties;
- Decide on your goals early on and create an exit strategy that respects them.
To learn all the concepts essential for investing in this sector, don’t forget our free crypto courses!
