Seemingly out of nowhere, Solana (CRYPTO: SOL) has been one of the best-performing cryptos in 2023. After doubling its price year to date, the token has seen a return of investor confidence after a dismal 2022 that saw it pulled down in part by contagion from the collapse of FTX.
However, its momentum appears to have stalled. Over the past 30 days, Solana is down 8%. Other top cryptos have also fallen during this period, but it seems like an inflection point for Solana as we head into summer. Will it be able to regain its momentum in the second half of 2023?
Follow the fundamentals
Perhaps most importantly, the underlying fundamentals at Solana continue to improve.
Crypto research firm Messari's State of Solana Q1 2023 report shows improving numbers on a quarter-over-quarter basis. For example, total value locked (TVL) into Solana-based projects increased by 23.5%, while non-fungible token (NFT) secondary sales volume was up by 35.5%. Both of these metrics are important when evaluating the overall volume of activity happening on a blockchain: TVL is a metric of overall health in decentralized finance (DeFi), while NFT secondary sales volume reflects the overall health in the NFT sector.
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Meanwhile, other core metrics on the network appear to be stabilizing. For example, the number of average daily transactions was only down 5% quarter over quarter. Despite that dip, total quarterly revenue actually improved by nearly 70%. And Solana continues to have success with its staking program, which is core to the health of any proof-of-stake blockchain. So, while there may not be anything wildly impressive, the latest numbers show that Solana has stabilized after a rough 2022. That gives me confidence that its recent gains are based on more than just hype.
Growth catalysts
Meanwhile, Solana Labs continues to roll out innovative new product offerings. In April, for example, it officially launched its new Saga mobile crypto phone, the first device of its kind from a major blockchain network. The Saga is optimized for crypto and Web3, and could help Solana win market share away from blockchain rivals such as Ethereum (CRYPTO: ETH). According to Solana Labs, the Saga will help to onboard new users onto crypto by making activities such as buying and selling NFTs much easier and more intuitive to engage in via a mobile device.
And, earlier in January, the Solana team outlined other web3 initiatives that they expect to drive growth for the blockchain. One big initiative was the migration of Helium (CRYPTO: HNT), a decentralized wireless network operator, over to Solana at the end of March. Overall, Solana is looking for new ways to use its superior network speed and scalability to gain edges in many different industries and sectors.
What could go wrong?
Of course, there are several reasons why Solana's price has been under pressure of late. One is that it continues to suffer major network outages, and with each one, confidence in its blockchain erodes. The last major outage, for example, was in February, and it lasted for 20 hours.
Another potential concern is that it appears to be losing market share in the NFT market. While Solana is still seeing NFT sales growth, the focus of NFT investors has shifted to Bitcoin (CRYPTO: BTC) and its new NFTs. According to the latest data from CryptoSlam, Bitcoin has surpassed Solana in terms of 24-hour NFT sales volume.
Should you buy Solana?
Considering all of this, I'm still bullish on Solana, both short-term and long-term. While it still has a long way to go before it can legitimately challenge Ethereum as the top Layer 1 blockchain network (a core network that other tokens can be built around), it seems to be back on track.
At a price of about $20, Solana is a relative bargain. Remember -- before the FTX collapse began in November, it traded near $35. So there's still significant potential upside, even if none of Solana's long-term growth catalysts start to kick in immediately.
