When it comes to cryptocurrency investing, Bitcoin (BTC -5.63%) and Ethereum (ETH -7.04%) typically get all the headlines. And for good reason. Both are up about 30% for the year, and both should be core components of any well-diversified crypto portfolio.
But if you only have $500 to spend on crypto right now, there might be a better option: Solana (SOL -13.35%). The sixth-biggest cryptocurrency in the world is up about 40% during the past 90 days, and is suddenly gaining a lot of attention due to the likely introduction of spot crypto exchange-traded funds (ETFs). Here's why you should consider Solana to be the next crypto in your portfolio.
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Is Solana the heir apparent to Ethereum?
Soon after it launched back in March 2020, Solana immediately made headlines as a potential Ethereum killer. Just like Ethereum, Solana is a smart contract blockchain network with a very diversified blockchain ecosystem.
But there's one key difference: Solana is blazingly fast, and much cheaper to use. The total throughput capacity on Solana is now more than 100,000 transactions per second. By way of comparison, the core Ethereum blockchain struggles to process 30 transactions per second.
What's really exciting is that all of that amazing throughput capacity is now being put to work, generating a surprising amount of revenue for Solana blockchain ecosystem partners.
According to investment firm 21Shares, Solana generated more than $2.85 billion in revenue during the past 12 months. This revenue came from a variety of activities, including decentralized finance (DeFi), cryptocurrency trading, meme coins, decentralized physical infrastructure (DePIN), and artificial intelligence (AI). That's on par with the 12-month revenue figures of companies such as Palantir Technologies (PLTR -5.39%) and Robinhood Markets (HOOD -8.77%).
The rise of Solana treasury companies
At one time, digital asset treasury companies were limited exclusively to Bitcoin. These companies raise money from outside investors, and then immediately use that money to invest in one specific cryptocurrency. The pioneer here is Strategy (MSTR -4.57%), which has now accumulated $78 billion worth of Bitcoin.
But of late, new publicly traded Solana treasury companies have launched as well. All told, there are 18 different companies that hold more $4 billion in Solana. That's roughly equivalent to 3% of Solana's total circulating supply.
The important point here is that this new source of demand is likely to send Solana higher. That has been the case with the Bitcoin treasury companies and the Ethereum treasury companies. In some instances, these new Solana treasury companies have secured multi-billion-dollar commitments from outside investors. So there is money just waiting to be put to work buying Solana.
The new Solana ETFs
I've saved the best for last, and that's the imminent launch of Solana ETFs. These spot ETFs will work just like the spot Bitcoin ETFs and the spot Ethereum ETFs. They will hold just a single cryptocurrency (in this case, Solana), and will give investors exposure to the spot price of Solana via a familiar investment product.
While the level of institutional demand for Solana is nowhere near that for Bitcoin or Ethereum, it's nonetheless impressive. According to the latest fund flow data from CoinShares, more than $1.5 billion has already flowed into Solana this year via a variety of different investment products. Earlier this year, JPMorgan Chase (JPM -1.45%) suggested that as much as $6 billion might flow into the Solana ETFs once they start trading. So this, too, is an important source of new demand.
How to put $500 to work
The current price of Solana is about $220 (as of Oct. 9). Thus, for a modest investment of $500, you would be able to pick up two Solana coins, and still have some money left over. Any extra funds could then be used to buy shares of the new Solana ETFs when they start trading.
Admittedly, Solana is only up 13% for the year. But in 2023, Solana absolutely went ballistic, increasing in price by more than 900%. So if you are looking for a high-upside, fast-growth crypto capable of generating triple-digit returns, look no further than Solana.
