Solana's (SOL +1.84%) price has risen about 65% during the past 12 months. That rally was driven by its new exchange-traded fund (ETF) filings, its growing adoption among financial institutions, and network upgrades that drew in more developers.
But even after that substantial gain, Solana's price remains 27% below its all-time high of $294 from 2021. Let's see why it could revisit and exceed that record high during the next few years -- and why it might be the smartest cryptocurrency to buy with $1,000 right now.
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What sets Solana apart from other cryptocurrencies?
Solana's eponymous blockchain uses the energy-efficient proof of stake (PoS) consensus mechanism to validate transactions. That makes it a competitor for Ethereum (ETH +3.74%), the biggest PoS blockchain, and distinguishes it from Bitcoin (BTC +1.73%), which is mined with the more energy-intensive proof of work (PoW) mechanism.
Solana can't be mined, and it has no maximum supply. But like Ethereum and other PoS blockchains, it supports smart contracts, which are used to create decentralized apps (dApps), non-fungible tokens (NFTs), and other tokenized assets. Therefore, it's valued by the growth of its developer ecosystem instead of its scarcity.
CRYPTO: SOL
Key Data Points
Solana integrates its own proof of history (PoH) validation mechanism -- which timestamps transactions before they're validated -- into its Layer 1 blockchain to achieve much higher speeds than Ethereum's Layer 1 blockchain. Solana can achieve a real-world speeds of 2,000-3,000 transactions per second (TPS), compared to Ethereum's max speed of just 18 TPS.
That's probably why Solana's number of new developers rose 83% year over year to 7,625 in 2024, which surpassed Ethereum's addition of 6,456 new developers. Solana also processed 81% of all decentralized exchange (DEX) transactions and 64% of NFT mints last year. Some of its biggest token launches included the TRUMP (TRUMP +18.55%) meme coin in January and the USD-backed Global Dollar (USDG +0.01%) stablecoin in February.
Solana's network upgrades are driving that growth cycle. Its new Blinks (blockchain links) and actions smoothed out its on-chain interactions during the past year, its impending Aspenglow protocol update should boost its network throughput and reduce its supply growth rate, and its long-awaited Firedance client upgrade should further improve its throughput (driving its speeds toward its theoretical maximum of 65,000 TPS) and decentralization features.
Those upgrades should keep Solana ahead of Ethereum's Layer 2 blockchains, which are built on top of its Layer 1 blockchain to process transactions at faster speeds off chain, as well as Cardano's (SOL +1.84%) hydra heads, which speed up its transactions in a similar manner.
What catalysts could drive Solana's price higher?
Solana's superior speed and growing popularity drove several major asset managers -- including Franklin Templeton, Fidelity, VanEck, 21Shares, Bitwise, and Canary Capital -- to submit their applications for Solana spot price ETFs during the past year.
If the Securities and Exchange Commission (SEC) approves those filings, Solana would become the third major cryptocurrency (after Bitcoin and Ethereum) with its own spot ETFs. Those approvals would likely stabilize its price while drawing in more retail and institutional investors. Lower interest rates would also amplify those gains by driving more investors back toward cryptocurrencies and other riskier assets.
Solana's foundation also launched collaborations with major banks like Bank of America and HSBC to tokenize stocks, U.S. Treasuries, and other assets on its blockchain. Several companies -- including Galaxy Digital (GLXY +2.44%) and Jump Crypto -- have already accumulated more than $1 billion in tokenized Treasuries on Solana. That support should limit its downside potential in this choppy market.
Why could Solana be a great place to park $1,000?
Solana will likely remain more volatile than Bitcoin and Ethereum for the foreseeable future, so it certainly isn't a safe place to park your life savings. But if you have $1,000 you can afford to lose, it's a promising token that still has a lot more long-term upside potential than the bigger coins.
