In 2023, Solana (SOL -5.11%) was one of the best-performing cryptocurrencies, up more than 1,000% for the year at one point. While that performance might be impossible to top in 2024, there's reason to think that Solana still has plenty more upside from its current price of $100.
In fact, Solana might now be on a trajectory to reclaim its all-time high of $260 by the end of 2025. Let's take a closer look at what needs to go right for Solana for this to happen.
Surge in network activity
One of the most promising signs for Solana has been the rapid growth taking place on its blockchain network. New users, for example, recently surged to their highest level since 2022. Overall network activity, as measured by metrics such as Total Value Locked (TVL), continues to show signs of improvement.
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Most importantly, trading volume on Solana's decentralized exchanges continues to grow quickly. This sudden display of strength in decentralized finance (DeFi) is notable, since it is an area where Solana has historically lagged. In fact, by the end of 2023, Solana was starting to eclipse its chief rival Ethereum (ETH -0.31%) in terms of overall trading volume on its decentralized exchanges.
Solana vs. Ethereum
That brings us to the No. 1 reason why I think Solana has the potential to skyrocket in value between now and the end of 2025: Solana is the one blockchain most capable of supplanting Ethereum as the market leader. Ever since it launched in 2015, Ethereum has reigned supreme in the smart contract blockchain space. But now, nearly a decade later, it looks like Solana could be ready to topple Ethereum.
The narrative about Solana as a so-called "Ethereum killer" has existed since it launched in 2020, due to its superior transaction processing speeds and lower costs. Now this narrative is really gaining steam with high-profile institutional investors. At the end of 2023, for example, Cathie Wood of Ark Invest pointed out on CNBC that Solana was a faster, more cost-efficient version of Ethereum. That quickly led to a 20% boost in valuation.
Just keep in mind, however, that Solana was trading for less than $10 at the end of 2022, and some traders thought it might eventually go to zero. So Solana is still a very risky, speculative investment.
Most notably, I'm concerned that some of the recent surge in activity we've been seeing on the Solana blockchain is really just a lot of smoke and mirrors. The recent surge in trading activity, for example, seems to be coming from the speculative buying and selling of Solana meme coins.
How high can Solana go?
While a price target of $260 for Solana might sound ultra-aggressive, it's really not. By way of comparison, investment firm VanEck recently set a price target of $3,200 for Solana. And we've already seen Solana soar by nearly 1,000% in 2023. So asking Solana to double or triple in value to reach a price it was trading at less than three years ago does not seem to be out of the realm of reason.
Moreover, if you do some quick back-of-the-envelope math, it's possible to see a real path forward to $260. Ethereum's total market cap right now is $277 billion, while Solana's total market cap is $42 billion. So investors currently perceive Ethereum to be 6.5 times more valuable than Solana.
If you buy into the investment thesis that Solana is chipping away at Ethereum's dominance and setting itself up to eventually supplant Ethereum as the market leader, then the market caps of the two cryptos should converge at some point. From this perspective, the potential upside of Solana might be as high as $650!
Is a price of $260 realistic?
For Solana to hit a price target of $260, a lot needs to go right. It needs to continue to chip away at Ethereum's dominance in key market niches, especially decentralized finance. It needs to convince more institutional investors that it really does have the potential to be an "Ethereum killer," and it needs to innovate at a rapid pace, in order to attract new users and developers.
That being said, I'm extremely bullish on Solana going forward. The darkest days of the "crypto winter" now seem to be in the rearview mirror. Two years from now, I'm confident that we'll see Solana climbing to an all-time high of $260.
