Solana (SOL -1.31%) is one of the most recent cryptocurrencies to experience explosive growth, with its price increasing by nearly 10,000% over the past year. It's also been dubbed by some as an "Ethereum killer" because it shares many similarities with its larger competitor, but it's also significantly faster than Ethereum.
It's been a rough couple of weeks for Solana, however, as its price has tumbled. It's currently down nearly 40% since its peak in November, and it's faced multiple challenges recently that could cause its price to dip even lower.
For long-term investors, though, downturns can be a fantastic buying opportunity. By buying when prices are lower, you could snag a great investment for a discount. Does that mean now is the time to invest in Solana? Here's what you need to know.
Why is Solana crashing?
Part of Solana's price drop may not have anything to do with the cryptocurrency itself. The crypto market in general has taken a hit over the last couple of weeks, and several major cryptocurrencies, including Bitcoin and Ethereum, have watched their prices plummet.
However, Solana has also experienced a couple of significant setbacks that may have affected its 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 about 17 hours back in September after an attack. Institutional investment firm Grayscale noted Solana's security risks in a recent report, explaining that it uses a blockchain technology that's not widely used and can potentially make it more vulnerable to attacks.
Is Solana a good investment?
While these recent security breaches are worrisome, they could simply be attributed to growing pains as the cryptocurrency finds its footing. That said, it is important to consider how much risk you're willing to take before you invest.
Solana does have its bright spots, and it could be a worthy competitor to Ethereum. It uses a proof-of-history validation protocol, which 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 work out its security issues and prevent future attacks, it could be a strong long-term investment. Nobody knows for certain what the future holds for Solana, though, so whether it's a good investment right now will depend on how optimistic you are about its potential and how much risk you're willing to take.
If you can tolerate higher levels of risk, you may choose to invest in Solana now in hopes that it will experience long-term growth. But if you're a risk-averse investor, there may be better options out there.