When the Securities and Exchange Commission filed its lawsuits against cryptocurrency exchanges Binance (BNB 1.70%) and Coinbase Global (COIN 5.68%) in early June, it also named Cardano (ADA 1.16%) and Solana (SOL 1.12%) as unregistered securities. The news was understandably shocking for many investors, and both cryptos have tumbled during the past 30 days.
On June 27, Robinhood Markets officially delisted both Cardano and Solana, meaning Robinhood customers won't be able to buy or sell them anymore on the platform. But that doesn't mean these two cryptos, both of which still rank among the top 10 cryptos in terms of market cap, are going away. In fact, this could be a "buy the dip" situation for both. Let's take a closer look to see which is the better buy right now.
Cardano
Of the two, Cardano is easily the safer bet, all other things being equal. That's because Cardano has taken a number of steps to shield itself from regulatory risk.
For example, at the end of 2022, Cardano formally launched a new phase of development called Voltaire, in which it will become more and more decentralized while handing off more and more power to its community. The ultimate goal is for Cardano to become self-governing, without the need for a third-party company to guide the growth of the Cardano blockchain.
Image source: Getty Images.
Cardano, too, has taken plenty of steps, too, to work with regulators in Washington, D.C. The founder of Cardano, Charles Hoskinson, has testified in front of Washington lawmakers, and has been widely praised for his defense of the crypto industry. As Hoskinson sees it, Cardano has never been a security, and never will be a security, and therefore has been unjustly caught up in the SEC crackdown on crypto.
In terms of long-term growth, the big catalyst for Cardano is still decentralized finance (DeFi). While Cardano has had some success in other areas of the blockchain world, such as non-fungible tokens (NFTs), the real future growth catalyst is decentralized finance (DeFi).
In 2023, Cardano's DeFi growth has been at record levels, and it's finally looking like Cardano might one day become one of the world's top DeFi ecosystems. The metric to watch here is total value locked (TVL), which measures how much of a crypto token is "locked up" in DeFi protocols. Cardano's TVL is now at a 10-month high, so that certainly bodes well for future growth.
Solana
From a purely regulatory perspective, Solana carries much more risk than Cardano. For one, Solana was caught up in the meltdown of crypto exchange FTX last year, due to the close links between former FTX Chief Executive Officer Sam Bankman-Fried and Solana. And, secondly, Solana has relied on a venture capital model of development.
This raises the question: Is Solana really a security? After all, venture capitalists invest in companies, right? But, like Cardano, Solana is making the case that it shouldn't be classified as a security.
The major selling point for Solana is its vast blockchain ecosystem. Solana is already a leader in areas ranging from NFTs to DeFi and has continually found new ways to build this ecosystem. In April, for example, Solana completed the migration of Helium, a decentralized wireless network, to the Solana blockchain.
The latest piece of the puzzle for Solana was the launch of a $999 crypto phone (known as the Saga) in April. As Solana sees it, the future of crypto is mobile. And this Saga phone will be the key to onboarding millions of new users to the blockchain world. This could lead to new growth in the Solana ecosystem, and the creation of new decentralized applications running on the Solana blockchain.
The concept of mobile crypto is a big, big idea, and it's the key reason I think Solana has so much more upside potential than Cardano.
Caveat emptor, crypto investors
Of course, if you are risk averse, you should avoid both Cardano and Solana (and probably crypto in general). There is simply too much regulatory risk over the short term, and any direct enforcement action by the SEC could pose an existential threat. We've already seen how even the specter of SEC enforcement can spook the market, and how trading platforms like Robinhood would rather delist these tokens than risk running afoul of regulators.
But if you're an investor with a high tolerance for risk, there is plenty of upside potential for both of these cryptos. My personal pick is Solana. Over the long term, Solana has the type of innovation strategy that could pay off big and lead to a much higher valuation.
