In 2023, Solana (SOL -5.39%) was one of the top-performing cryptocurrencies, surging by more than 900%, easily outpacing the 150% rise of Bitcoin (BTC -2.24%). There were even suggestions that Solana was on a path to overtake Ethereum (ETH -0.25%) as the world's second-most valuable cryptocurrency.
But the narrative has shifted this year. Yes, Solana is still up 80% year to date, but there are serious questions being asked about its current valuation. With that in mind, here's a closer look at two key factors that could determine Solana's price trajectory during the next nine months.
Meme coin mania
The primary factor pushing Solana higher right now is meme coin mania. The poster dog for this craze is Bonk (BONK -14.48%), which soared more than 1,000% in the span of less than 30 days last year. But there are plenty of other cryptos that have had similarly impressive returns, including another meme token with the logo of a dog wearing a hat that is up 1,300% this year.
Seemingly out of nowhere, Solana has emerged as the blockchain of choice for new meme coins. As a result, new get-rich-quick meme coins seem to launch on a daily basis.
On the one hand, meme token mania has led to a surge of activity and development on the Solana blockchain, and that has pumped up all of Solana's core metrics. For example, the number of wallets holding Solana tokens has surged, daily transaction volume is off the charts, and the amount of daily trading activity on Solana's decentralized exchanges has now surpassed the amount on Ethereum's decentralized exchanges.
On the other hand, meme coin mania has led to a wave of speculative activity that may or may not be sustainable. Things have gotten so out of control that Anatoly Yakovenko, the co-founder of Solana, felt the need to get involved and tell people to "stop doing this." He was particularly concerned about people sending Solana coins to anonymous digital wallet addresses, all in the hopes of getting new meme coins at their pre-sale prices (i.e., before they started trading on exchanges). For stock investors, this would be like wiring money to an anonymous trader in New York City who claimed to be able to get you access to a hot new company before it went public.
Solana can't entirely put an end to meme coin mania, because it has arguably been one of the key factors behind its popularity during the past 12 months. But it does need to do something about some of the more common scams in the crypto market, including the dreaded "rug pull" (in which the creators of a new meme coin suddenly disappear with investors' money).
Solana's mobile strategy
The second key factor to consider is Solana's mobile strategy. This is one area where Solana has a competitive advantage over every other major blockchain, including Ethereum. Last April, Solana formally unveiled the $1,000 Saga, a "crypto phone" optimized for the Solana blockchain. Out of the gate, sales of the device were slower than expected, and Solana eventually slashed its price by 40% just to attract buyers. It turns out that most people -- surprise, surprise -- were not willing to pay the same price for an untested crypto phone as they were for a traditional smartphone.
Image source: Getty Images.
But sales of the Saga suddenly picked up at the end of last year (thanks in part to meme coin mania), and Solana started off 2024 by announcing a second-generation Saga with a more reasonable price. Pre-sale orders for this new phone recently hit 100,000, and some analysts now think Solana can break even on its mobile strategy at an annual sales volume of 250,000. It's a huge bet, to be sure, but if it pays off, it could be crucial for sustaining Solana's price trajectory.
The next step, of course, will be to find a "killer app" for that crypto phone. This would need to be a completely new app for blockchain and crypto users, and one that isn't available on traditional smartphones. According to investment firm VanEck, such a killer app for crypto could unlock tremendous value for Solana, sending its price soaring to over $3,200 -- nearly 17 times recent prices.
What's next for Solana?
How and whether Solana resolves those two key issues will be critical for its growth and sustainability. If it finds a winning strategy, its price could skyrocket. If it doesn't, crypto investors may find out that Solana's price can crater just as easily as the price of the most speculative meme coin.
I'm still bullish on Solana's prospects. Its all-time high of $260 seems to be within striking distance, and some are even predicting that Solana could soar as high as $1,000 during this crypto rally. As long as you are aware of the risks and volatility involved, Solana could be worth a closer look for your crypto portfolio.
