Crypto season is alive and well. The sector lifted off after Donald Trump won the election in early November, promising a much friendlier regulatory environment than under President Joe Biden's administration. Rising Treasury yields led investors to take a breather to start the year but recent positive inflation data has helped lead to a recovery with investors now preparing for Trump's first days in office, which will have big ramifications for the entire crypto sector including Solana (SOL +1.10%). Should you buy the world's fifth-largest cryptocurrency while it trades for less than $275?
Arguably the best network of any crypto
Since the election, other cryptocurrencies like XRP and Dogecoin have wildly outperformed Solana. Dogecoin always seems to have the hype, while the founders of Ripple, the company behind XRP, met with Trump shortly after his election win, stoking excitement. XRP also has several potential catalysts on the horizon.
Solana Price data by YCharts
Still, one could argue that Solana gets overlooked by the market when it has what could be the best network of any cryptocurrency from a technical standpoint, especially the larger ones. One key metric crypto observers tend to look at is how many transactions per second a network can process. Despite its popularity, Bitcoin, the world's largest cryptocurrency, can process very few. Ethereum can only do about 15. XRP is hailed for its ability to process as many as 1,500 transactions per second. However, they all lose to Solana in this regard, which can process as many as 2,600 transactions per second.
Many have also said Solana theoretically has the capacity to process as many 65,000 transactions per second, although it hasn't got anywhere close to that number yet. Solana's incredible speed is made possible by the proof-of-stake (PoS) and proof-of history (PoH) consensus mechanisms governing its network. Ethereum also uses PoS, which is when investors stake their tokens to have the chance to validate transactions and earn rewards. Those with more tokens staked have higher odds of validating transactions.
PoH goes one step further and provides each block with a time stamp, so nodes (computers, routers, etc.) don't need to determine and agree on the order of blocks, which can be time-consuming. PoH improves throughput and Solana is currently the largest and most prominent blockchain network utilizing PoH.
Should you buy Solana below $275?
Solana likely offers the most technically sound network of scale, so it stands out in terms of its potential payment-processing capabilities, which is a key utility of crypto. However, unlike Bitcoin it does not have a fixed supply but one with limited issuance of new tokens. The plan is for Solana's new token issuance to decline until the network is only issuing 1.5% new tokens annually in perpetuity.
That is better than some tokens that don't have any limits on supply, but it's not likely to reap the same benefits as Bitcoin, which many investors now view as an inflation hedge because of its fixed supply ceiling.
However, many experts have speculated that Solana may eventually get its own spot crypto exchange-traded fund (ETF), which proved to be major catalysts for Bitcoin and Ethereum. Spot crypto ETFs actually purchase the tokens they are tracking and issue shares based on the number of tokens they hold, with the goal to mirror the cryptocurrency's price. Spot crypto ETFs make cryptocurrencies easier to buy for investors and increase institutional adoption as well.
Ultimately, I think Solana is a buy at less than $275 (it recently traded at about $220). The token has not rallied like some of its peers, potentially offering a future run. Furthermore, the network looks to be one of the best -- if not the best -- in the cryptoverse. Other than Bitcoin and Ethereum, I usually recommend investors consider taking smaller, more speculative positions in cryptocurrencies due to their inherent volatility.
