Solana (CRYPTO: SOL) is one of the youngest cryptocurrencies to see explosive growth, with prices rising nearly 10,000% over the last year. It is also referred to as the “Ethereum killer” by some because it shares many similarities with its larger competitor, but it is also significantly faster than Ethereum.
However, it has been some tough weeks for Solana as the price has fallen. It is currently down nearly 40% since its high in November and has faced several challenges recently that could cause its price to drop even lower.
For long-term investors, however, downturns can be a fantastic buying opportunity. Buying at lower prices can be a great investment for a discount. Does that mean now is the time to invest in Solana? Here’s what you need to know.
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Why does Solana crash?
Some of the Solana price drop may have nothing to do with the cryptocurrency itself. The crypto market in general has taken a plunge in the past few weeks, and several major cryptocurrencies, including Bitcoin and ether, have seen their prices go down.
However, Solana has also seen some significant setbacks that may have had an impact on the price. Most recently, the blockchain reportedly suffered from a distributed denial-of-service (DDoS) attack that slowed its performance.
This isn’t the first time Solana has been hit as it was also offline for around 17 hours after an attack in September. Institutional investment firm Grayscale drew attention to Solana’s security risks in a recent report, stating that it uses blockchain technology that is not widely used and can potentially make it more vulnerable to attack.
Is Solana a Good Investment?
While these recent security breaches are worrying, they could simply be attributed to the growing pains as cryptocurrency takes hold. However, it is important to consider how much risk you want to take before investing.
Solana has its bright spots and could be a worthy competitor to Ethereum. It uses a proof-of-history validation protocol that is similar to a proof-of-stake method, but more efficient. This results in incredible speed and its network is significantly faster than most other cryptocurrencies.
If Solana is able to resolve its security issues and prevent future attacks, it could be a strong long-term investment. However, nobody knows exactly what the future holds for Solana. So whether it’s a good investment now depends on how optimistic you are about the potential and how much risk you want to take.
If you can tolerate higher levels of risk, you can invest in Solana now in the hopes that it will experience long-term growth. But if you are a risk averse investor, there may be better options.
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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