Solana… Dead or the “Ethereum Killer”?

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Overview

Solana is a powerhouse in the Layer 1 blockchain space, designed for mass adoption and enhanced by the Proof of Stake and Proof-of-History mechanisms. It claims the capacity to handle up to 3,000 transactions per second, but in a real-world scenario, it efficiently processes around 270 swaps per second on an AMM. This outperforms BNB’s 194 TPS, Avalanche’s 175 TPS, and ETH’s 25 TPS, positioning Solana as a strong contender in the blockchain arena. However, it hasn’t been all sunshine and rainbows for Solana. The recent court approval for FTX to sell crypto assets and the prevailing bearish markets have cast shadows over its achievements. The community has been inundated with negative news, overshadowing the blockchain’s technical prowess and potential.

Tokenomics

Solana’s current price stands at $24.70. With a circulating supply of 416.60M SOL and a total supply of 560.38M, the market cap is pegged at $10B, and the FDV is $14B. The circulating supply is a mix of SOL that’s actively traded and includes both staked and unstaked tokens.

The non-circulating supply is often locked in stake accounts or held by Solana Labs and the Solana Foundation. SOL’s annual inflation rate is 6.017%, set to decrease by 15% every 180 epochs, each lasting approximately 2.5 to 3.5 days. This benefits stakers who contribute to network security. Validators, who can unstake and sell SOL, currently hold a significant portion. A total of 476,650,635.7 SOL, or 86.4% of the total supply, is staked, indicating strong confidence in the network’s future.

Reasons to Invest Solana is not just a cryptocurrency; it’s an asset that many believe to be undervalued. Its intrinsic value isn’t reflected in its current price, marking a golden opportunity for discerning investors.

1. Resilient Ecosystem

Solana mirrors the early days of Ethereum, where it faced scepticism and a bearish outlook. Yet, an in-depth look reveals a vibrant ecosystem, marked by active developer engagement, a robust community, and a growing interest from entities eager to build upon it. I mean you have to be honest, despite all these major bad news in the last months Solana is still standing and even increased in price in the last weeks.

2. Developer Loyalty

The unwavering developer base amidst the FTX fiasco underscores the robust conviction in Solana’s potential. Increased developer activity is a precursor to a surge in products and users, indicative of long-term growth and sustainability. Each of these reasons highlights a distinct aspect of Solana’s potential, offering investors a multifaceted view of its prospects in the competitive crypto landscape.

3. Development Momentum

Despite market fluctuations, Solana’s development trajectory remains upward. Milestones like the integration of Solana Pay with Shopify, Visa’s adoption of USDC settlement on Solana, and the introduction of Solana EVM by Hyperledger’s Solang are indicative of its progressive stride.

4. Brand Strength

The downturn of FTX and the dip in SOL’s price purged the ecosystem of unfavorable actors. Among the “ETH Killers,” Solana stands out for its significant mind-share, popularity, and brand presence.

5. NFT Potential

Solana is making waves in the NFT market, holding 5-20% of daily NFT volume and rivaling Ethereum. This underappreciated aspect could boost SOL’s profile significantly. The NFT arena is known for drawing massive retail interest. As Solana gains traction as a secondary NFT chain, the increased visibility could elevate SOL’s value and adoption.

Risks

U.S. Bankruptcy Judge John Dorsey approved FTX’s proposal at a court hearing in Wilmington, Delaware, allowing FTX to sell up to $100 million in cryptocurrency per week and enter into hedging and staking agreements that will allow FTX to minimize the risk of price volatility and earn passive income on more mainstream crypto assets like bitcoin and ether. So far, this was even bullish for the price, yet we have to stay cautious as any changes regarding this could trigger bad news. Stagnation in Solana’s development or failure to gain a footing with traditional companies could also have a negative impact. However, current trends do not point to such stagnation.

Takeaway

Solana, though riskier than established players like Ethereum, presents an enticing risk-reward proposition. Currently it constitutes 3.8% of the CE Pro Public Portfolio and I’m looking to increase this number to 7%. I will use S-DCA to build my position within the next few weeks. As many of you know, I like to follow the money cycle. Therefore I currently focus mainly on BTC, but I will slowly increase Large Cap positions as we will see more money flowing into the space in the upcoming months.

I will share my entry points with you via the ⁠watchlist updates. Although looking at the last ATH (All Time High) may not be the most meaningful indicator, the picture below shows us that SOL has had a huge drop in price, but also a lot of potential if it reaches the old ATH.

Solana’s alliances with corporate giants like Visa position it favorably for the anticipated “institutional” cycle in 2024. In the landscape of Layer 1 blockchains, Solana could be the token that is overlooked the most, bearing in mind that its greatest asset – its partnerships and ecosystem – could also be its Achilles heel, should the momentum falter.

In conclusion, I think Solana is overlooked by most and has a nice risk/reward ratio. The “Ethereum Killer” title is definitely up for debate, but Solana’s potential is undeniable.

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