Is It Worth Investing In Solana?

Last Updated November 17th 2022

18 Min Read

Solana is the new blockchain network that has been making headlines in the cryptocurrency industry. The blockchain gained traction when most online users started using it to sell and buy stuff online using crypto.

Solana’s innovative solutions allow online merchants to instantly make complete transactions and avoid the hassle of having to wait for days. While the blockchain was launched back in 2017, its native token SOL started trading in the spring of 2020.

The token has grown to become the 10th biggest cryptocurrency with a market cap of around $4.9 billion, according to updated data from CoinMarketCap.

More companies are now using Solana to complete transactions online and enjoy the bliss of fast transactions per second, security and ease of use.

This makes the blockchain an attractive target for investors who are looking to bank on its huge success. But what exactly is Solana, and is it a good investment?

We will be answering these and many more questions about the Solana blockchain, so make sure to read on.

Contents:

What is Solana?
How Solana Works
The SOL Token
Solana Price History
Solana Price Predictions
How to Invest in Solana
Is Solana a Good Investment?
Conclusion: So, Should I Buy Solana?

What is Solana?

Solana is a cryptocurrency project aimed at solving what is commonly known as the blockchain trilemma. This is where a blockchain network is simultaneously scalable, secure and decentralized.

In other words, Solana wants to make blockchain applications much faster and secure without sacrificing decentralization. While this might sound like an easy thing, it has been a huge bottleneck in the crypto industry, with major cryptos like Bitcoin and Ethereum being unable to accomplish all three at the same time.

This means that one of these factors has to be sacrificed for the other to thrive. For instance, Bitcoin sacrifices transaction speeds for better security and decentralization.

Solana's main purpose is to build the fastest blockchain and allow both investors and its users to enjoy a more fluid crypto experience.

In fact, the blockchain so far claims to be the fastest in the industry. For instance, around June 2021, Solana was supporting up to 50,000 transactions per second (TPS) with as low as 400 milliseconds of block time latency.

In comparison, Ethereum can only process a mere 15 transactions per second, with each block being processed in 15 seconds against Solana’s 400 ms.

Solana is also capable of what is known as big-block design. This is where more transactions can be processed in one block.

What is more, Solana offers lower transaction fees compared to Ethereum and most other blockchain networks.

The Solana blockchain is a product of Anatoly Yakovenko, who founded it in 2017 after several attempts at solving Ethereum and Bitcoin scalability issues. Anatoly came up with a new consensus known as Proof of History (PoH) which significantly helps to automate blockchain transactions and solve scalability to a plausible degree.

So, how does Solana solve the blockchain trilemma and what makes it unique?

Let’s quickly look at how the blockchain works.

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

How Solana Works

To solve the blockchain trilemma, Solana capitalizes on eight innovative technologies. For the purposes of simplicity, we will only touch on proof of history consensus, which is unique to the Solana blockchain network.

The working mechanism of Solana is fairly technical, so we will try to avoid the mumbo-jumbo and break down the process in an easy to understand manner.

To better understand how Solana works, you need a refresher of what exactly a consensus is. Simply put, a consensus (such as PoW) is a mechanism or process of agreement between blockchain nodes concerning new transactions.

For consensus to hold, events have to be ordered correctly. For instance, you cannot use cryptocurrencies that you have not received yet.

Having said that, here is how the Proof of History consensus works.

First of all, transactions are entered into the Leader
The Leader then sequences the transaction messages and orders them correctly. This makes it easy for other nodes to process the messages.
Next, the Leader executes transactions in the current state, usually stored in a computer RAM.
After execution, the Leader will then publish the transactions and signature of the final state to replication nodes, also known as Verifiers.
From there, the verifiers execute the same transactions on their copies of the state and then publish their own signatures of the state after receiving confirmation.
Finally, the published confirmations will act as votes for the PoH consensus algorithm.

The SOL Token

The SOL token is used for several purposes on the Solana blockchain. These include:

Making micropayments known as lamports
Staking
Running and authenticating the output of chained programs

There are a total of 507 million SOL tokens, but only 301 million have been released into the market.

Here is how the tokens were distributed:

16.23% were sold in an initial seed sale
12.92% were dedicated to a founding sale
12.79% were distributed among Solana team members
10.46% were reserved for the Solana Foundation

The remaining tokens are released to the market for public or private sales.

Solana Price History

Solana’s native utility token SOL started trading on the crypto market in April 2020. As a result, we have only about a year of price history to build on. However, while the token’s trading journey has been short, it has been fairly disruptive and got the attention of most investors and media houses along the way.

The token started trading at around $0.5, according to data from CoinMarketCap. There wasn’t much action until July 2020, with the price mostly consolidating between $0.5 and $0.8.

Around mid-July, SOL crossed $1 then started picking up momentum at a time when the world economy was crippling under the force of the COVID-19 pandemic. However, since the pandemic was mostly detrimental around March, Solana might have missed the most devastating part by a few months.

So, by the start of September, the coin had risen as high as $4.7, then just as quickly, dropped to $2 towards the end of September.

From there, SOL fought not to go below $1 and only came close to doing so towards the end of October.

In late 2020, a market-wide bull run started, but Solana didn’t join until around late January 2021. This marked the beginning of its biggest price momentum so far.

The upward trajectory was so sharp that by February 25th, SOL was hovering above $16 after rising by close to $7 in a week. The price fluctuated slightly going forward, and one month later, on March 25th, SOL was trading at $13.03 per token.

The subsequent months recorded one of the wildest price rides in Solana’s history. By the start of April 2021, the token had climbed to $19.08 and more than $27 a week later. It then slightly dropped to $25 in mid-April, then by April 25th, it had skyrocketed to more than $47.

That is a staggering 88% increase in about two weeks. But the bull run didn’t end there.

At the start of May, SOL was trading at more than $49. It slightly dropped to $43 a week later and $41 on May 13th. Then just as price experts expected a further downtrend, Solana started shooting again, and at around mid-May, it reached a price of $58.30.

The market-wide bull run that started in January 2021 started signing out towards the end of most, and most cryptos lost their value. Solana was not spared. The token dropped to as low as $24.69 on May 23rd 2021.

There was a lot of price fluctuation in June and July. In August Solana's price broke above the $75 line and on 9th September it reached a new all-time high of $214, according to CoinMarketCap. On November 6th SOL reached its current all-time high of $260.06.

Solana started 2022 trading at around $170, but due to short-term bearish price action, the price dropped to $78 in March. In April SOL climbed up to $132. The crypto market crash brought Solana's price down to $28 in June. In the following months, the price was fluctuating between $28 and $46.

The ongoing crises of FTX impacted badly SOL and the price dropped to $14.

Check Out: Why Solana Is Going To Explode

Solana Price Predictions 2023 And 2024

Most price analysts are still positive that SOL’s price will be on an uptrend next year.

As usual, there are a lot of mixed signals when it comes to price predictions. But as we always say, the figures we mention here are not absolute and should only give an indication of the general price direction.

This is because the crypto market is harder to predict than the stock market, which is why getting even close figures is not easy.

Having said that, we have looked at several Solana price predictions, and we think the token has a positive outlook going forward.

Coinpedia predicts that Solana might be traded at above $44 by the end of 2023 and $75 by the end of 2024.

Digital Forecast is expecting Solana to reach $24 by the end of 2023 and $31 by the end of 2024, while CoinPriceForecast predicts that Solana price will hit $22 by the end of 2023 and $28 by the end of 2024.

Although the predictions still widely differ, all the price forecasts indicate that Solana will do much better.

Of course, the differences in price predictions are brought about by the expected vitality of Solana in the following months. Despite this, you now understand that the token will rise, and if you buy now and hold, it might be very profitable in the next five years or so.

Anyway, if, after going through the technical analysis, you still believe that Solana will make a good addition to your portfolio, let’s show you some of the ways you can start investing in it.

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How To Invest In Solana

There are several ways you can invest in Solana. Two of the most common are:

Holding for the long-term
Trading for the short-term

For the best experience, we usually recommend doing a combination of both holding and trading if you have the time and resources. Otherwise, you are free to stick with one that you think is the most effective for you.

Let’s quickly look at how you can profit from Solana using either of these methods.

Method 1: Holding Solana for the Long-term

If you are just starting out and find trading too complex or time-consuming, we recommend you start by holding. Holding (commonly known as HODLing in the crypto space) is where you buy some Solana SOL tokens, transfer them to an off-exchange wallet then wait until the price goes up before you can sell again.

Usually, holding might take up to several years, depending on how much profit you want. For instance, you can HODL your Solana tokens for up to 10 years or even 15 years. The most hardcore crypto holders reportedly wait until the underlying asset gains commendable mainstream adoption before selling.

Otherwise, if you are not in a hurry, you can hold for five years or so. But how profitable is hodling?

Let’s say you buy SOL now and then sell in five years when the price is $50 based on CoinPriceForecast’s predictions. So, if you invest only $1,500, you get around 107 tokens based on the current market price.

If you sell those tokens in five years, you stand making about $5,350! Not bad for an investment that doesn’t need constant attention. But if you are not willing to wait for more than 5 years, you might want to try trading.

Read Also: Can Cryptocurrencies Make Me Rich?

Method 2: Trading Solana for the Short-term

Trading Solana is a good option if:

You don’t want to wait for many years before seeing any profit
You want something to complement your long term investment
You want to make a profit without buying the underlying asset

There are several trading platforms and exchanges you can use to trade Solana, but for the best experience, you might want to try out eToro.

Generally, there are two common ways to trade Solana. These are:

Trading using CFDs (Contract for Difference)
Buying from an exchange

With CFD trading, you simply speculate on the price of SOL without actually buying it. Contract for Difference is basically a type of contract where you agree to exchange the difference in the price of the underlying crypto from when you open a position to when you close it.

For instance, if you open a long position and the price of SOL increases, you make a profit. But if the price decreases, you make a loss and vice versa. This way, CFD trading allows you to make a profit whether the price falls or rises.

Alternatively, you can trade by buying SOL when the price is low and selling when the price goes up.

So, now you know how to invest in Solana by either trading or holding. But is it really a good investment? Let’s find out below.

Check Out: Top 7 Cryptocurrencies To Day Trade

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Is Solana A Good Investment?

While Solana has dipped from its all-time high price, some crypto experts still believe Solana is a good investment. As we have seen from the price predictions, there is a good chance that the token might go as high as $44 by the end of next year.

This means that several price analysts are positive that Solana might surpass its all-time high price before the year comes to an end.

However, given Solana’s revolutionary technology, we are positive that it might be a great investment going forward. The fast-paved price momentum makes it a good long-term investment as well as a gem for day traders.

In fact, according to The Motley Fool, Solana might be crypto’s hidden gem, and only a few investors have realized its future potential. The blockchain is quickly gaining mainstream adoption, with several high-profile businesses using it for faster, secure and decentralized online transactions.

Its combination of a proof of stake and proof of history consensus algorithm makes it not only the fastest blockchains but also a much-needed utility for businesses.

The PoS mechanism means that the more money you put into the network’s liquidity pool, the more you get in the form of rewards. This alone makes Solana an attractive option for investors.

Apart from the attractiveness of its innovative technology, Solana is also proactively working to ensure that it becomes both a reliable blockchain technology for its users and a profitable asset for its investors.

For instance, in October 2020, Solana partnered with Circle, one of the biggest online payment systems, to enable faster processing of payments using the USDC stablecoin. In turn, Circle benefits from Solana’s robust ecosystem of fast payments and blockchain-based financial applications.

What is more, Digital Assets AG is now offering tokenized stocks on Solana. Tokenized stocks make it easy for investors all over the world to access the U.S. stock market and also buy fractional shares instead of whole shares.

This not only boosts the network’s credibility but also the value of its native token as it will be exposed to more use cases.

In fact, the association with the $100 trillion stock market exposes Solana to a massive potential for increasing its market share and luring more investors aboard.

So, generally, we believe Solana will make a great addition to your portfolio going forward. However, being a cryptocurrency and a highly volatile one, we don’t guarantee that you will get your money’s worth when you invest in Solana.

For now, you can watch the price action, do some research and decide whether you want to HOLD or trade.

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Conclusion: So, Should I Buy Solana?

Solana’s utility token has shown potential for growing very fast. We can assume that the Solana token might rise even higher in the case of a bull market.

As a result, if you believe that Solana is a good investment for you, you might want to buy now before the price starts on another uptrend.

Of course, cryptocurrencies are highly volatile, and it is hard to tell if the price is going to rise or fall. So the best thing to do is buy at a price you think is most affordable for you.

For instance, if you think the current price is within your investment budget, you can go ahead and buy.

For traders, there is no need to wait much longer. You can buy now then go long or short depending on how you think the price will move.

Alternatively, if you don't want to buy any Solana tokens at all, you can trade CFDs on trading platforms like eToro. Contract for Difference is a popular form of derivative trading that allows you to profit off an asset without actually owning it.

All you have to do is speculate on the price direction. For instance, if you think the price is going to fall, you open a short position, and if you think it will rise, you go long. Either way, you make a profit.

Finally, the decision to buy Solana or not should be entirely yours. Make sure you do your own research, and if you decide to buy, do not go beyond your risk tolerance.