Both Solana (SOL -4.19%), up 110% for the year, and Ethereum (ETH -1.40%), up 55% for the year, have been top performers in the crypto market in 2023. In many ways, their return to form this year after an absolutely dreadful 2022 is based on investors realizing that all the panic-selling last year probably was overdone.
While both Solana and Ethereum have good long-term growth prospects, what makes them particularly interesting as investment targets is that both have important catalysts coming up in April. Here's a closer look at both of them.
1. Solana: Saga
On April 13, Solana is planning to launch Saga, a $1,000 Android phone that has been optimized for Web3, blockchain, and crypto. Solana is calling it "Web3 in your pocket," and the grand vision is to make everything you like to do with crypto -- such as trading non-fungible tokens (NFTs) or making crypto payments -- easier, faster, and more secure. As Solana notes in its slick marketing materials, it will be easy to "trade tokens while waiting in line for coffee [and] mint NFTs on your morning commute..."
Image source: Getty Images.
From my perspective, this Saga phone accomplishes two important strategic goals. First and most importantly, it unites all of Solana's Web3 initiatives (including Solana Mobile and Solana Pay) under one big umbrella. Solana Pay makes a lot more sense, for example, when you think about making in-store payments from a crypto-friendly Android phone. In their January 2023 update to members of the Solana ecosystem, the founders of Solana made exactly this point.
Secondly, the Saga phone provides a real, tangible product for the casual crypto user. From a branding perspective, this is smart.
Let's face it: Crypto can be complex, confusing, and a bit abstruse. It's filled with buzzwords and lingo, and a lot of things that make sense to crypto enthusiasts -- such as being able to use your mobile phone as a super-secure blockchain wallet -- probably don't make a lot of sense to casual crypto investors. So I think it's important to get a sleek piece of crypto hardware into the hands of potential users. There is no other major blockchain that is combining hardware and software in such an innovative way.
2. Ethereum: Shanghai
On April 12, Ethereum is set to unveil the new Shanghai upgrade, which marks the first major upgrade to the Ethereum blockchain since The Merge last September. The Shanghai upgrade has one primary purpose: to make it easier for users to withdraw their staked Ethereum from the blockchain.
After Ethereum transitioned from a proof-of-work blockchain to a proof-of-stake blockchain as part of The Merge, this was something that Ethereum users clamored for. The reason is simple: Until the Shanghai upgrade goes live, the 19 million ether tokens (currently worth $35 billion) now staked are basically illiquid. You can put your money in (via staking) and earn returns, but your tokens are locked up.
It would be as if you were investing in a low-yield deposit account at a bank, but the bank told you that it didn't know exactly when you would be able to take that money out. If you are staking tens of thousands of dollars' worth of Ethereum, this is obviously a big deal.
If you're buying and selling Ethereum but not actually staking it, though, this upgrade may come and go without you even realizing it happened. Yes, Ethereum is promising some efficiency gains and lower transaction fees after Shanghai, but this is likely due to a minor upgrade called Capella that is now being included with the bigger Shanghai upgrade.
Risk factors
Although both of these events -- the Saga phone launch for Solana and the Shanghai upgrade for Ethereum -- are generally viewed as positive catalysts, there is still plenty that could go wrong. In the case of Solana, for example, the risk is that the new Saga phone might be a dud. According to crypto insiders, initial preorders for the phone were lower than expected. Fair enough -- would you trade your new iPhone for a $1,000 Solana phone in the middle of a crypto winter? So it will be interesting to see what happens.
In the case of Ethereum, the risk is that the sudden unlocking of staked Ethereum could cause a lot of price volatility. Using the bank analogy above, imagine the type of bank run that might occur if everyone rushes to get their money out of Ethereum at the same time. Ethereum says it has safeguards in place to make sure that this does not happen, but analysts continue to warn of a mass liquidation event that sends the price of Ethereum swooning.
What happens in April?
Even with these risks, I'm confident that both Solana and Ethereum could see positive prices moves after their respective events this month. They were already good long-term buys heading into April -- the new launches just make them that much better of a buy. I'm bullish long term on both Solana and Ethereum.
