Is Solana (SOL) Safe To Invest In?

Should You Invest In Solana (SOL) Coins?

Last Updated January 26th 2022

14 Min Read

Solana (SOL) is a top 10 digital asset by market capitalization. In this article, Trading Education presents numerous factors that will help you decide if Solana is safe to invest in. The information given will also assist you in deciding if you should invest in Solana in the short, medium, and long term.

Solana is a large-cap digital asset with a market capitalization of more than $30 billion.

Its market value confirms the extensive interest in its native asset, SOL by traders and investors.

The keyword “investing in cryptocurrency 2021” yielded 1.2 billion results in 0.64 seconds and “investing in cryptocurrency 2022” yielded 256 million results in 0.59 seconds.

The most interesting part is that the keyword “investing in Solana crypto” yielded 6 million results in 0.56 seconds.

This means that you are not alone in your search for the potency of the SOL cryptocurrency due to the possibility of its issuing authority (Solana Ecosystem).

The millions of people searching for the next cryptocurrency to explode in 2022 which includes Solana are legitimate traders/investors and illegitimate investors (hackers, scammers, and other third-party individuals/organizations).

Legitimate investors are interested in learning about the pros and cons of Solana so that they can add the novel token of the entire project into their investment portfolio.

Illegitimate investors are third parties that go length and breadth to invest in ingenious ways that will help them create fake websites and tokens to lure unsuspecting individuals to send them their investment capital for short-term gains.

Solana Investing: Crypto Crime Reports Investors Should Be Aware Off

According to London-based blockchain analytics firm Elliptic, users of decentralized finance (DeFi) products have suffered more than $12 billion in losses through crimes related to decentralized applications.

The categories that have been hit hardest are decentralized lending and exchange.

Some of the losses stem back from 2020 but the majority of the losses came in 2021. So, how are criminals bypassing the great security systems that come with blockchain technology?

Criminals have taken advantage of design flaws and introduced bugs in codes that allow them to target DeFi sites.

What’s more, the numerous liquidity pools that come with DeFi have allowed criminals to launder proceeds of crime without leaving traces due to the extremely decentralized nature of the crypto finance space.

In August 2021, one of the major DeFi sites Poly Network was rocked by one of the biggest ever thefts in the space.

The hackers stole $610 million but later returned all the funds.

This means that despite the variety of measures being put in place by major smart contract blockchains, security flaws still exist.

In addition to these, the United States Internal Revenue Service has seized $3.5 billion worth of cryptocurrencies during the fiscal year 2021.

This figure accounts for 93% of all the assets seized by the tax enforcement agency in 2021.

This should alert you as to the numerous ways and means hackers, scammers, and money launderers use crypto to go about their daily activities.

In the resurrection of the markets in August after the crash that began in the second week of May 2021, it was reported that thousands of investors lost more than $100 million in a scam.

The scam involved meme-inspired currency, Dogecoin (DOGE).

Most of these crimes were made possible due to the fear of missing out (FOMO) on potential gains.

This is why millions of residents in the United Kingdom have lost millions of pounds, as reported by the BBC.

Since Solana happens to command more than 6% of the DeFi market, it is only right that several investors question the legitimacy of the project.

Some of the questions that continue to trend online are, is Solana a safe investment, is Solana safe to invest in and is Solana safe?

What To Consider Before Buying Solana?

Solana is a highly volatile investment.

If you are looking for safe investments that are extremely risk-free, we would advise you to look at other investment options.

You can buy Fixed Deposits in the form of bills and bonds.

Investing in Solana (SOL) and other digital currencies comes with a huge risk. So be prepared to make profits and losses in your journey as a cryptocurrency trader.

Before you buy SOL, you must consider volatility.

Volatility in trading and investing settings is a measure of how much the price of an asset has moved up or down over a given period.

An asset is said to be more volatile when it has the potential to offer higher losses or higher returns over shorter periods.

Since SOL experiences multiple percentage swings daily, SOL can be classified as a highly volatile asset that comes with huge risks.

To give you an extensive understanding of the unpredictable nature of SOL, let us analyze its price history from its inception as a crypto trading asset in April 2020.

Check Out: Should You Buy Solana (SOL)? 4 Pros, 4 Cons

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

Solana Price History

After appearing on exchanges on 10th April 2020, SOL opened its first trading day for $0.832, increased to an intraday high of $1.31, dropped to an intraday low of $0.6942, and finally closed the day at $0.9511. The trading volume for the day was $87,364,276.

After three weeks of trading, SOL ended its first trading month at $0.691 on 30th April 2020. The trading volume for the day was $5,016,892. SOL shed 16.9471% of its opening day price and 94.2575% of its opening day volume.

SOL then scrolled through May 2020 with diminishing trading volumes that impacted its price negatively.

With the inception of the crypto boom of 2020 taking shape in June, the novel token of the Solana ecosystem increased significantly to close on 30th June 2020 at $0.8601. SOL increased by 24.4718% from where it left off at the end of April.

After crossing the $1 price milestone in July, SOL increased substantially in price to reach a new high of $2.90. Solana soared 237.17% from the last day of the second quarter to the last day of the third quarter on 30th September 2020.

Selling pressure and profit-taking from traders that felt SOL could plunge into new high lows in the future led to a decrease in the price of the token.

Solana closed on 31st December 2020 at $1.51. This was a 47.931% decrease in the price of SOL from trading in the last quarter of the year.

Overall, SOL increased by 81.4904% from its opening day price to the last day of 2020.

Solana began 2021 with an opening day price of $1.51, reached an intraday high of $1.86, tested an intraday low of $1.50, and closed the day at $1.84.

With increasing trading volumes of more than $150 million and $200 million, SOL took advantage of the February and March boom to end the 1st quarter of the year at $19.47.

SOL reached a new all-time high price of $58.30 on 18th May 2021 and eventually settled at $35.56 on 30th June after giving in to the bearish outlook of the market.

In the first 6 months of 2021, SOL increased by 3,760.93%.

SOL opened the third quarter of the year strongly at $35.51, crossed the billion-dollar mark in terms of trading volume on 15th August, and finally closed the third quarter at $141.07 on 30th September. SOL increased by as much as 297.268% in the third quarter.

After recording billions of dollars in volume, SOL reached a new all-time high price of $260.06 on 6th November.

As of December 2021, SOL had returned 17,122.5% year to date.

This is the primary reason why you have to diversify your portfolio. You must not risk all your capital on SOL or any cryptocurrency.

Due to the enormous risks involved, you should always trade 5% of your budget.

Do not solely rely on cryptocurrencies for passive income.

Choose highly volatile and less-volatile assets so that losses in one asset can be made up for by others.

Trading Education Advice; If you want to maximize profits while minimizing losses, invest in Solana (SOL) an amount of money you can afford to lose.

What Are The Risks Associated With Solana?

As earlier pointed out, the biggest risk associated with investing in Solana and other cryptocurrencies comes from fraud, hacking, and scamming.

According to the Federal Trade Commission (FTC), there were more than 7,000 reports of cryptocurrency investment scams from the last quarter of 2020 to the first quarter of 2021.

According to the Commission, scammers have taken advantage of three essential elements. Cryptocurrency payments do not come with legal protections, cryptocurrency payments typically are not reversible, and some information about your transactions will likely be public.

In addition to this, scammers guarantee that you will make money, promise big payouts with guaranteed returns, promise free money, and make big claims without details or explanations.

In a study conducted by the Motley Fool Survey Team on 500 investment and crypto fraud targets in June 2021, cryptocurrency frauds led the list.

More than 51% of scam targets invested in Mutual Funds, 27.78% invested in EFTs, 47.57% invested in individual stocks, and a whopping 57.64% invested in cryptocurrency.

This is the primary reason why millions of traders and investors should go about their activities cautiously.

Trading Education Advice; Do not respond to unsolicited offers from strangers through social media or email.

It does not matter the viability and feasibility of the potential gains being offered by the so-called experts.

When you go through crypto news and forecasting portals, the predictions made are based on possibilities and not certainties after experts conduct fundamental and technical analysis.

If you want to invest in Solana, take it upon yourself to conduct independent research.

Get to know what moves the price of SOL aside from speculation. Get to know all the areas the Solana ecosystem thrives on.

Additionally, get to know the new decentralized applications that will soon launch on the platform.

Although investing in SOL and other coins is risky, you can minimize risk since you know the factors that made you throw money behind the coin.

Other Types of Scams to Look Out for

There are several forms of crypto scams such as market manipulation, pump-and-dump schemes, rug pulls, trading hacking/theft, and initial coin offering (ICO) scams.

We would like to focus on two.

Initial Coin Offerings (ICOs) for Fake Cryptocurrencies

Initial Coin Offering popularly termed as ICOs is a way of raising funds to back an up-and-coming crypto project.

Although several successful blockchain technologies such as Ethereum and Cardano relied on ICOs to raise funds for their business ventures, scammers have entered the space due to the possibility of raising funds within a short period.

According to the Review of Financial Studies, approximately $13 billion was raised between January 2016 and August 2019.

At the time of writing, there are 831 ended ICOs, 5 ongoing ICOs, and 10 in the beginning of 2022, as per CoinMarketCap.

The purpose of ICOs is to support great software developers without the needed financial resources to make their imaginations a reality.

Presently, more than 5% of crypto projects from the more 17,000 in the space today are thriving on fake corporations.

Most of the representatives behind such projects are clever to the extent of creating fake social media accounts and corporate teams. Once they engage with fans of the token and the entire crypto community, they build strong credibility – a reputation they are going to thrive on to dupe people in the long term.

Once they accumulate huge sums of money which cannot be reversed, they take off with investor money.

This is the primary reason why analysts at Bloomberg believe billions are getting pilfered annually through a variety of cryptocurrency scams.

The way things are going, this will only get worse.

Analyst Nathan Reiff at Investopedia believes that you can identify ICO scams by getting to know the team, doing an extensive study of the whitepaper, looking into the token sale, exercising caution, and analyzing the feasibility of the project.

Analyst Reiff is spot on but scammers have found a way to source information from several whitepapers which gives more credibility to their fake projects.

Research more about a project.

Monitor the trading volume of the asset and see if there is consistent investor interest.

Once you monitor such essential metrics, you should know you are investing in a coin that is backed by a legitimate project.

Crypto Pump and Dump Schemes

Pump and Dump have been around for some time.

Since the golden rule of trading and investing is to buy when prices of assets are down and sell when prices of assets are up, scammers use this technique to make huge returns in short periods.

By making false, misleading, and exaggerated comments, prices of assets shoot up substantially.

A great example can be attributed to writing highly optimized articles that appear on the first pages of Google, Yahoo, and Bing. Most of these articles are about an exchange listing or a famous store accepting a particular token as a payment method.

Once this happens, traders rush to the coin by pouring more liquidity into it.

Once the price shoots up within a few hours and reaches the price ceiling scammers set for the token, gains are locked in and they take off with profits.

Huge selling pressure normally ensues and leaves the token with red percentages next to it.

To those who are unlucky, the asset can trade in irrecoverable zones for months which leads to a huge loss of capital.

Read extensively about every news item surrounding tokens.

More importantly, read news from credible crypto news and prediction portals.

How To Keep Your Solana Coins Safe

Before investing in Solana, you should find a great place to hold your tokens. This is because no cryptocurrency exchange (centralized/decentralized) or wallet guarantees 100% safety of your SOL holdings.

Although several exchanges support SOL, Trading Education would like to recommend eToro as the safest and best way to buy Solana in 2022 and beyond.

Aside from eToro, some of the cheapest, fastest, and best ways to buy Solana include Binance, Coinbase, OKEx, Huobi Global, Kraken, Bitrue, and BitMart among others.

These exchanges provide multi-signature authentication that helps safeguard your account.

Most of them have some form of insurance that can help indemnify you should something bad happen.

Aside from centralized exchanges, you can keep your Solana coins safe on digital wallets.

Wallets such as TrustWallet, Coin98, Sollet, SimpleHold, Atomic Wallet, Zelcore, Ledger Nano S, Solong Wallets, MathWallet, and D’CENT can help you store your SOL tokens safely and securely.

Don't Miss: Why Do Solana (SOL) Coins Have Value?

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

Solana Security Versus Privacy

Security and Privacy are highly relevant when searching for the safest cryptocurrency to invest in 2022 and beyond.

Solana has a highly secure protocol and the exchanges as well as the wallets that hold SOL tokens have multi-tier security systems in place.

When it comes to Solana security versus privacy, you should understand the difference between privacy and security in the crypto finance space.

This can be understood better when we factor the Solana Protocol and SOL into account.

Solana Protocol is a highly functional open-source project that relies on blockchain technology’s permissionless and trustless nature to provide decentralized finance (DeFi) solutions.

SOL is the native asset that oversees all transactions in the ecosystem.

Solana Privacy

Through the Solana Protocol, you can send money to friends and family without the backing of traditional financial institutions.

Aside from this, you can engage with decentralized applications and issue smart contracts in the form of lending and exchange without having to go through any bureaucratic process. This can be done privately.

Solana Security

Unfortunately, the security of your SOL tokens depends on representatives of your selected exchange and wallet and you as a holder.

If you hold SOL on eToro, you hold a custodial account.

This means you have access to your account and not SOL. Therefore, the security of your SOL lies in the hands of the security system of eToro.

If you decide to store your SOL on a wallet such as TrustWallet, you would be given private keys to the coins.

The security of your coins lies in the hands of TrustWallet to protect their application from hacking and you as a trader to hold onto your private keys.

The Bottomline ─ So, Is Solana Safe To Invest In?

YES! As per research conducted on the Solana project, many analysts and experts think it’s safe to use the Solana Protocol, and safe to invest in digital currency, SOL.

Solana is on the list of several analysts when it comes to the top 5 cryptocurrencies to invest in 2022 as well as the best cryptocurrencies for long-term investment.

Buy SOL on well-regulated exchanges and enjoy your trading and investing journey.