Bitcoin may be getting all the headlines in the crypto industry these days, but there are plenty of other cryptocurrencies that have the potential to outperform it this year, including Solana (SOL -4.54%).
Solana started 2023 trading around $10, and ended the year trading around $100 after briefly hitting a peak around $120 in late December. While it will be difficult to duplicate that performance in 2024, there are two big reasons why I think Solana is exactly the type of crypto that you should be buying hand over fist right now.
Solana is the next Ethereum
Most importantly, Solana is finally starting to fulfill its promise as "the next Ethereum." Ethereum is still the acknowledged market leader in nearly every blockchain niche, from non-fungible tokens (NFTs) to decentralized finance (DeFi). But Solana now appears to be gaining market share at Ethereum's expense. At the end of last year, for example, Solana started to post higher NFT sales volume and decentralized exchange trading volume than Ethereum for the first time ever. And I think that momentum will carry over into 2024.
High-profile institutional investors are starting to buy into this narrative of Solana as "the next Ethereum." Cathie Wood of Ark Invest, for example, appeared on CNBC at the end of the year, extolling the virtues of Solana as a faster, more cost-effective version of Ethereum.
As this investment thesis gains momentum, it could lead to more institutional investors putting their money into Solana. At the end of last year, CoinShares (which tracks crypto inflows and outflows) found that institutional investors were moving money out of Ethereum and into Solana. That's obviously going to help push up the price of Solana.
Solana's mobile strategy is taking off
For the past 18 months, Solana has been working on a mobile crypto strategy. It all started back in June 2022, when Solana announced it was working on a "crypto phone" that would be optimized for Solana blockchain users. That was followed up by the official launch of the Saga smartphone priced at $1,000 in April 2023. And now, in January 2024, Solana appears ready to launch a second, more budget-friendly version of the Saga.
Image source: Getty Images.
It's easy to see how physical hardware products such as the Saga could spark long-term growth for Solana. They could lead to more developers migrating over to the Solana blockchain ecosystem and the launch of hardware products could be a fantastic way to onboard "crypto-curious" people who have a difficult time conceptualizing blockchain technology. Products such as the Saga could eventually become a pathway to onboard millions of new users into the world of Web3 and decentralized applications.
The big question, of course, is whether the world really needs a $1,000 smartphone that is optimized for crypto. The major selling point of the Saga was the inclusion of a crypto wallet within the phone itself. That's great if you're buying and selling NFTs, or if you're regularly buying and selling crypto tokens on decentralized crypto exchanges. But if you're an average user, it's easy to see why you might not want to replace your current smartphone anytime soon.
Will this Bitcoin diversion last?
The launch of the new spot Bitcoin exchange-traded funds (ETFs) could have broad ramifications beyond just Bitcoin. They could significantly impact the amount of new money that flows into Solana.
In the first two weeks of 2024, the flow of money into Solana has slowed to a drip. According to CoinShares, around the time of the spot Bitcoin ETF launch, Bitcoin accounted for a staggering 98% of all investor inflows into crypto.
Maybe this is a short-term phenomenon. But what if it's not? For that reason, I'm keeping a close eye on institutional inflows into Solana over the next few weeks.
All in all, Solana looks good
And, of course, there are many investors convinced that Ethereum will be able to fend off any advances from Solana and retain its position as the preeminent Layer-1 blockchain. There's also hype now building around a potential spot Ethereum ETF. If that ever gets approved, the thinking goes, it could have the same type of impact on Ethereum as the spot Bitcoin ETF has had on Bitcoin.
That being said, I'm still convinced that Solana is now a better long-term play than Ethereum. Solana has superior technology, as well as a potential game changer in mobile crypto. As a result, I'm bullish on Solana.
