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Solana, a darling of the 2021 bull market, had a spectacular fall in November given its association with FTX. It is now trading at $24.8 – more than 150% up from the low of $9.6. It has broken the trend of falling against BTC recently and continues to gain adoption (transactions, wallets etc) while sorting out its tech issues. What’s ahead for this asset and what can investors plan for? We track some trends below.
1. Among Layer 1s and 2s, Solana currently ranks 2nd in monthly active addresses:
Solana blockchain, with 5.8 million addresses, maintains a distinct lead in terms of monthly active addresses after BNB Chain. This indicates that usage and adoption continues to be robust in spite of issues in recent past.
Source: Nansen
2. This has led to higher transaction volumes on the network
Benchmarked against key competitors (Ethereum Layer 2s), Solana maintains a distinct lead in terms of daily transactions in the last 180 days. The trend also seems to be going up.
3. It seems to have addressed network downtimes recently
Although Solana gained a reputation for having network problems in the past year, its team has have tried to identify and solve issues that plagued the network in the past.
That said, its recent outage occurred on 25 February, resulting in transaction disruptions and leading to a network restart.
Source: Messari
4. NFTs are Solana’s USP
Solana gained voice as one of the favoured blockchains for NFT trading given its lower costs and faster implementation compared to Ethereum. This took a hit post November as some of its top NFT partners migrated to Polygon and Ethereum.
To tackle this trend, Solana recently unveiled a “State Compression” technology, through which minting costs for NFTs can be lowered further to a significant level. A comparison of transaction costs for minting NFTs is below:
Source: Coingape
Given the above, what does the asset hold for its investors?
SOL has to perform better than BTC
A quick look at the SOL/BTC chart indicates that SOL has been in a macro downtrend against BTC over the last few months. It is down nearly 50% in the last 6 months.
Essentially, SOL being a higher risk asset, must do well against BTC to be worthwhile investing in. Else investors can stick to BTC instead to safeguard their portfolios. The downtrend seems to have been broken this week, though. If this trend sustains, SOL becomes a solid diversifying asset within a crypto portfolio.
Source: TradingView
The above also predicates that BTC and ETH continue to rally well into April and May – an altcoin doing well when the market is healthy is not new. But can SOL beat the market when things aren’t going well? Its competitor, Polygon (MATIC), seems to be a safer bet going by 2022 data – though in 2023, SOL has outperformed.
Source: TradingView
Overall, Solana is still reeling from their association with Sam Bankerman Fried and FTX. According to The Block, their active wallets have declined by 60%.
However, from a broader narrative of blockchain being used as a payment layer or for verification of digital assets, Solana stands out tall. The network is completing 4,600 transactions per second while Ethereum is processing 10.4 transactions per second with low costs. How SOL performs as an investment in 2023 is yet to have a definitive trend.
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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.
