Solana (SOL 3.00%) is now up a head-spinning 153% for the year. That's nearly twice the performance of Bitcoin (BTC 1.48%), which has been leading the recovery in the crypto market and is up 79% for the year. So just how much higher can Solana soar?
Certainly, there is reason to be optimistic. After all, even at a price of $25, Solana is trading nearly 50% below its 52-week high of $48. With that in mind, here are several factors to keep in mind if you are thinking about buying Solana.
Underlying blockchain fundamentals
Sometimes, you have to peek under the hood to see how everything is running. And, for Solana, that means checking out its underlying blockchain fundamentals. Across the board, these appear to be improving: Transaction volume is up, the number of unique Solana users is increasing, and the number of smart contracts being deployed across the blockchain is up. All of these suggest that future growth is sustainable.
Best of all, in the second quarter of 2023, Solana reported 100% uptime for its blockchain. This is of particular concern because irregular outages were a very real problem for Solana last year. And, even in February of this year, Solana experienced an unexpected outage that lasted nearly 19 hours. So 100% uptime for the quarter is a big deal and a sign of much greater reliability.
New growth in key business segments
For Solana, one area of particular concern is non-fungible tokens (NFTs). Prior to the FTX meltdown last year, this was one area where Solana was making a serious run at market leader Ethereum (ETH 4.99%). Creators and developers alike were migrating over to Solana for their new NFT projects. But after the collapse of FTX last November, several of Solana's biggest NFT collections decided to head elsewhere, and momentum seemed to be stalling out for Solana this year.
That's why I'm keeping a close eye on Solana's performance in this area. The good news is that, starting in Q2 2023, Solana seems to have found new momentum in the NFT space. As a result, Solana still ranks No. 2 among all blockchains in terms of NFT sales volume.
Mobile crypto strategy
Solana's embrace of a "mobile crypto" strategy is something that completely differentiates it from every other top layer-1 blockchain. Even Ethereum, the second-biggest crypto in the world, doesn't have a mobile crypto strategy. In April, Solana officially launched the Saga crypto phone, which the crypto's founders see as the easiest way to onboard casual crypto users.
Image source: Getty Images.
Of course, skeptics have a right to raise questions about this new crypto phone. Are people really going to pay $1,000 for a crypto phone simply to have more secure management of their digital assets and easier access to some new decentralized apps? The phone only went on sale to the public in early May, so by the end of the summer, we should have a much better idea of just how successful this mobile crypto strategy is going to be.
Regulatory uncertainty
On June 6, the Securities and Exchange Commission (SEC) named Solana as an "unregistered security" in its lawsuits filed against cryptocurrency exchanges Binance and Coinbase Global. That immediately spooked the market, and Solana fell by 20% almost overnight. Out of an abundance of caution, Robinhood Markets (HOOD 4.44%) decided to delist Solana from its trading platform as of June 27.
That's certainly scary stuff if you're planning to buy and hold Solana for the long haul. The good news here is that a recent positive court ruling in the case of Ripple Labs and XRP (XRP 0.86%) seems to have reduced some of the risk surrounding Solana. The thinking here is that, if the SEC cannot classify XRP as a security, then there is little to no chance that it can classify Solana as a security. No surprise here, but Solana is up nearly 50% over the past 30 days in what some might view as a relief rally.
Is Solana a buy?
If you are thinking about buying Solana, there's a lot to consider here beyond just the baseline uncertainty and volatility of the crypto market. It's important to be comfortable with the level of regulatory risk involved as well as the overall recovery narrative for Solana.
I'm comfortable with both, and that's why I'm bullish on Solana's future prospects. I'm particularly impressed by the long-term nature of Solana's mobile crypto strategy and just how unique it makes Solana compared to any of its peers. Plus, there is a certain margin of safety in buying Solana now, knowing that it is still 50% below its 52-week high. From my perspective, it's still not too late to buy Solana.
