The crypto ecosystem has gone through several dramatic changes in the past few years. In 2020 and 2021, the industry was driven by hype and speculation only to crash in 2022 and early 2023. There was no better example of this hype cycle than Solana (SOL -5.32%).
It peaked at more than $250 per token and dropped below $10 per coin after the collapse of FTX. But this continues to be one of the lowest-cost and highest-throughput blockchains in the crypto ecosystem, and if you think the innovation and disruption of crypto is from utility and not just speculation, this is still a cryptocurrency to hold long term.
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What people do in crypto matters
The health of a blockchain can be seen in the activity of developers and users. This can be judged by developer activity. Solana reports 2,500 to 3,000 developers consistently, short of only Ethereum (ETH -0.15%) at about 6,000 developers.
On the user side, transactions per second is a great gauge of how much activity there is on a blockchain. Solana averages between 3,000 and 4,000 transactions per second compared to a blockchain like Ethereum at around 13 transactions per second.
These two factors together will give you an idea of the health of the blockchain itself. If developers are building it and users are using it, the blockchain has a likely chance of growing in the future.
ETFs and the future of crypto investing
We have seen billions of dollars flow into the crypto industry over the past month after the approval of spot Bitcoin exchange-traded funds (ETFs) by the Securities and Exchange Commission. This led to speculation that Ethereum will be the next to get an ETF and more cryptocurrencies may follow.
Solana could get an ETF if Ethereum is approved. It has similar characteristics and smart contracts to Ethereum and has strong institutional and consumer interest.
But I don't think it's likely Solana will hold a place like Bitcoin in the crypto ecosystem. Bitcoin is more like digital gold that investors simply want to hold long term, whereas Solana is more of a utility coin for the blockchain. But there could be buyers for both kinds of assets.
Solana's uncertainty
The one downside of Solana is the coin itself is not as important to the ecosystem as it is to something like the Ethereum blockchain. Yes, there's a proof-of-stake element to Solana, but a lot of transactions simply happened with USDC stablecoin as the medium of exchange.
The future of Solana may be driven by a USDC-denominated token or some other fiat-backed token, and not the Solano cryptocurrency that we see today. This may mean less upside with the cryptocurrency itself, despite being the native coin to the blockchain.
Given all of these factors, I think the biggest reason to be bullish on Solana long term is the fact that this is where innovation development and transactions are taking place on the blockchain today. There's more activity and innovation on Solana than almost any other blockchain. And activity and USDC we are using the Solana blockchain for normal financial transactions without even knowing it in the future. That will be a truly disruptive future, and is a great reason to buy Solana.
Is it too late? I don't think it is.
