The macroeconomic environment has investors fleeing from risky assets. As a result, the crypto market has fallen 58% from its November high, erasing $1.7 trillion in value. But that sort of sell-off has happened before, and the market has always recovered. There is no reason to believe this crypto crash will be any different.
Additionally, blockchain technology has the potential to disrupt the financial system, making payments and savings products more efficient. With that in mind, Ethereum (ETH 4.69%) and Solana (SOL 10.75%) look like smart long-term investments.
Decentralized finance (DeFi) has the potential to reshape the world. DeFi products allow people to invest, borrow, and earn interest on money without the help of traditional financial institutions like banks. Eliminating those intermediaries makes the financial system more efficient, and Ethereum sits at the heart of the DeFi movement.
Specifically, Ethereum was the first blockchain designed to support self-executing computer programs known as smart contracts. That technology underpins the expansive DeFi industry, and Ethereum has parlayed its first-mover status into a strong competitive position. With $72 billion invested in DeFi products on the blockchain, Ethereum accounts for 64% of all DeFi investments across any blockchain.
Ethereum also benefits from a significant network effect that should keep it at the forefront of the industry. Each software developer in the Ethereum ecosystem creates incremental value for every user and vice versa. That dynamic should continue to drive innovation on Ethereum. As that trend plays out, demand should rise for the underlying cryptocurrency -- the ETH coin -- sending its price higher.
Additionally, a study from Fidelity suggests that institutional asset managers are increasingly bullish on cryptocurrency. That's a big deal because they control over $100 trillion in assets, and a small percentage of that total could send the entire crypto market to the moon. Better yet, Ethereum is the second-most-popular digital asset among institutional investors, and as adoption continues to rise, the price of ETH could soar. That's why this cryptocurrency is a smart long-term investment.
The Solana blockchain aims to be a better version of Ethereum. Its core innovation is a hybrid consensus mechanism that blends proof of stake (PoS) with proof of history (PoH). The PoS protocol keeps validators honest by requiring that they have a stake in the network; the PoH protocol timestamps transactions as they occur to create a verifiable order of events, which substantially accelerates throughput.
The Solana blockchain can theoretically process 50,000 transactions per second (TPS). For context, Ethereum currently handles about 14 TPS, though a scaling solution set to launch in 2023 promises to boost that figure to 100,000 TPS. Regardless, thanks to its highly scalable blockchain, Solana transactions cost a fraction of a cent, making it popular with developers and DeFi investors.
Solana features over 1,500 blockchain projects, including Magic Eden, the second-most-popular NFT marketplace in the last 30 days, according to DappRadar. Solana also ranks as the fourth-most-popular DeFi ecosystem, with over $4 billion invested on the platform. While that figure has fallen substantially during the ongoing crypto crash, the total value invested on the Solana network is still three times higher than it was one year ago.
Even more exciting, Solana Pay went live earlier this year, bringing fast and cheap blockchain-powered payments to merchants. Solana Pay allows consumers to transact directly with merchants, eliminating banks, card networks, and other intermediaries. Better yet, consumers can make payments with stablecoins like USD Coin, meaning they don't have to spend volatile crypto assets. That technology could reshape the business world.
The bull case for Solana is straightforward: It is a thriving ecosystem of decentralized software and DeFi services that supports fast, cheap transactions. As products on the blockchain see greater adoption, demand for the underlying cryptocurrency -- the SOL coin -- should rise, sending its price higher. That's why this cryptocurrency is a buy for long-term investors.