Thus far in 2023, Solana (SOL -8.62%) has been one of the standout performers in the crypto market. It is up 76.38% over the past 30 days, and currently trades at $23.34.
That's welcome news for Solana investors, who feared that its price might be going to zero after the disastrous meltdown of FTX (FTT -7.32%) in November.
The only problem is that Solana appears to be overheating right now, with its gains far outpacing those of traditional market leader Bitcoin (BTC -5.67%), which itself is up an impressive 36.10% over the past 30 days. So now comes a moment of truth for investors: Should they continue to buy Solana while it's below $30?
Investor overreaction
In order to calculate a fair value for Solana, consider its roller coaster ride over the past three months. Before the FTX scandal, it was trading at around $37. In a span of just a few days, though, it collapsed to under $14 on fears that the crypto might get dragged down by its extensive ties to former FTX CEO Sam Bankman-Fried.
By the end of 2022, Solana was trading for less than $10, and many investors were saying that it could fall to zero. It ended the year down nearly 94%.
But then we turned the page on a new year, and Solana has been on a rocket. Investors clearly overreacted on the way down, and now they are overreacting on the way up. That's the only way to explain the meteoric fall and rise.
That's why I think Solana's fair value is north of $30, since it is likely retracing its path back to where it was before the FTX scandal. The only question, really, is how long it will take to break the $30 mark.
Solana's improving fundamentals
Aside from investor perceptions, there is a lot happening below the surface that investors may be ignoring right now that could send Solana even higher. For example, it is taking extensive steps to improve the performance and reliability of its blockchain network.
This was one of the big complaints leveled against Solana in 2022, and the good news is that it is close to releasing new improvements aimed at limiting network outages.
Image source: Getty Images.
In addition, Solana is taking steps to consolidate its vibrant ecosystem. In 2022, the number of developers on its blockchain increased by 83%, and it is now second only to Ethereum (ETH -7.39%) in terms of monthly active developers. This heavily discounts the notion that developers, creators, and users are abandoning it for rival blockchains.
Solana is also trying to make its blockchain more attractive for staking. This will help boost Solana's relatively weak numbers when it comes to total value locked (TVL), a key metric for assessing the health of a particular blockchain ecosystem. Staking is a way of locking up value, and is thus a key driver of TVL.
New Web3 initiatives
The real reason I'm bullish on the crypto's prospects, though, has to do with a coming onslaught of new Web3 initiatives from the blockchain. At the end of January, the founders of Solana released an upbeat report that details many of the Web3 projects that will drive future growth.
The report showcased how Solana is tackling Web3 from a number of different angles. And it also helped to show how all of these initiatives are part of a central, defining vision.
Whether it is new mobile networks, new publishing platforms, or new decentralized finance (DeFi) platforms, Solana is reimagining the future of the web around crypto and blockchain. And it will soon launch physical hardware, such as the new Saga "crypto phone," that will help users leverage the full power of Web3.
A long-term bull
For all of the above reasons, I'm bullish on Solana in the short and the long terms. If it can post signs of success with its Web3 strategy, then I think that $30 is just the starting point, not the end.
In August 2022, Solana was trading near $50, so that might be a more reasonable price target. This implies a near doubling in price, but given its recent rocket trajectory, it's certainly within reach.
The big caveat here is that some of the bullish momentum around Solana seems to be slowing. At one point, for example, the digital coin was up more than 100% for the year, and the sky seemed to be the limit.
That's why it's so important to pay attention to Solana's long-term strategy. I'm confident that the underlying fundamentals and vibrant ecosystem are strong enough to make it a long-term buy.
