Solana (CRYPTO: SOL) has been a big winner over the past 12 months. The cryptocurrency is up more than 11,400%. An initial investment of $ 1,000 in December 2020 would now be worth over $ 115,000.
But – as you have probably heard many times before – past successes are no guarantee of future performance. There is a lot of disagreement about how Solana will perform in the future. Here are the bull and bear cases for the soaring digital coin.
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Bullish Take: Momentum that could accelerate
Keith Speights: Here’s a cryptocurrency quiz question: What is the fastest growing blockchain in the world? It is not Bitcoin, ether (CRYPTO: ETH), or one of the ones with dogs on their logos. Solana has the greatest dynamic in the crypto universe. I think this dynamic could accelerate.
Solana is now the fifth most popular cryptocurrency on the market. Their rapid rise is a direct result of the rapid pace of the blockchain. Solana is able to process almost 50,000 transactions per second. But the low cost is also a big plus. The average cost per transaction is only $ 0.00025.
Seven Seven Six, a venture capital fund founded by Reddit co-founder Alexis Ohanian, and the Solana Foundation plan to invest $ 100 million in developing what Ohanian calls “the next wave” of social media on Solana. This is the kind of investment that is likely to attract even more development in the blockchain.
Bearish attitude: Still lagging behind Ethereum
Adria Cimino: Solana has indeed emerged as a major player in the cryptocurrency market. It has climbed the market cap and performance ladder. Still, there are many reasons to exercise caution when looking to invest in Solana. First, Solana’s pace of growth cannot last forever. And with the number of crypto players out there, investors have a huge choice. Investors can step out of this year’s biggest winners and place bets on emerging players who haven’t gained much.
Another area of concern is the number of projects Solana has versus bigger rival Ethereum. Solana is the foundation for more than 350 projects including decentralized financial applications, games and non-fungible tokens (NFTs). That’s great. But it’s still far behind Ethereum. According to the State of the d’Apps website, the world’s second largest cryptocurrency includes nearly 3,000 projects. Solana also lags behind Ethereum when it comes to selling NFTs. Ethereum is the first ever NFT sales volume while Solana ranks fourth according to CryptoSlam. Ethereum already has the first-to-market advantage. And it’s about to roll out an upgrade next year that will make its platform faster and more efficient. This can make it difficult for Solana to catch up.
Finally, another point to consider is the instability potential of the Solana network. Solana experienced such an event as early as September. According to the Solana Foundation, the platform reported “temporary instability”. A large increase in transactions overwhelmed the processing queue – as a result, some parts of the network went offline. It’s important to remember that Solana’s blockchain is still in beta. So we could face more growing pains as this young crypto continues on its evolutionary path.
Bridge the gap
So which perspective from Solana is correct? Maybe both. The bull and bear views on this cryptocurrency are actually not as far apart as you might think.
It is entirely possible that the adoption of the Solana blockchain will gain momentum. Even if that happens, the price of the digital coin is unlikely to skyrocket as much as it did last year. However, that doesn’t mean Solana couldn’t still make impressive profits in 2022 and beyond.
The bearish argument that Solana is unlikely to catch up with Ethereum might be spot on. However, that doesn’t rule out the prospect of Solana gaining ground on the more popular blockchain platform. Both cryptocurrencies could do well in the future.
What about Solana’s instability in September? Investors should be aware of these types of risks. Of course, problems can arise with any blockchain – especially if major changes are made, such as the upgrade planned for Ethereum next year.
The bottom line is that Solana is risky (like all other cryptocurrencies). It could undercut – or outperform – other digital coins. Nobody knows exactly what the future holds for Solana. This is why it is important for investors to evaluate the bull and bear falls for the platform.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all reflect critically about investing and make decisions that will help us get smarter, happier, and richer.
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