Most of the crypto market has been in the red lately, and Solana (SOL +1.98%) is no exception. In September, it was approaching $250, its best run since hitting an all-time high of $294 at the start of the year. It's now worth about $180 (as of Oct. 22).
Dips can be a good opportunity to buy a quality investment at a discount. With cryptocurrency, it's a little trickier, considering the risk involved. If you're wondering whether to buy Solana while it's under $200, here's how it currently looks as a crypto investment.
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The fundamentals haven't changed
While Solana's price has changed, its fundamental value hasn't. What makes Solana special is its speed and ultra-low costs. It uses a combination of a proof-of-stake consensus mechanism and its own unique proof-of-history system to validate transactions, delivering efficiency few blockchains can match.
Solana regularly processes about 1,000 transactions per second (tps), according to data from Chainspect, and it has a theoretical maximum of 65,000 tps. It's the second-fastest blockchain in terms of tps, behind only Internet Computer and far ahead of competitors like Ethereum, which processes about 20 tps. Transaction fees on Solana are typically well under $0.01.
Crypto's recent flash crash provided a stress test for Solana, as users scrambled to sell positions. While some other blockchains crashed, Solana showed that it can maintain high performance during periods of high activity. It continued to process thousands of transactions per second without a spike in fees.
Solana is still well behind Ethereum for DeFi
As a smart contract blockchain, Solana provides a platform for decentralized finance (DeFi) services, just like Ethereum. It was even one of several blockchains referred to as an "Ethereum killer." But in more than five years since launching, Solana hasn't come close to catching its biggest rival in this area.
There's $11 billion of total value locked (TVL) in DeFi applications on Solana, according to DeFiLlama. That number is moving in the right direction -- it was about $6 billion a year ago -- but Ethereum has $83 billion of TVL, 63% of the entire DeFi market.
The same is true if you look at the growing stablecoin market. Once again, Ethereum is the clear leader, with $165 million in stablecoin value. Solana has $15 billion.
This doesn't mean Ethereum is the better investment. Solana, as mentioned, is a much more efficient blockchain with faster transactions and lower fees. However, Ethereum has a tremendous first mover advantage. Solana's growth will likely depend on its ability to take a larger chunk of the DeFi market.
CRYPTO: SOL
Key Data Points
ETF approval should attract institutional investors
Several fund managers have filed applications for the first spot Solana ETFs, and the Securities and Exchange Commission (SEC) has already given a provisional approval to one from 21Shares. There's still a final review needed, which can only happen once the government shutdown ends and the SEC reopens. Still, it's looking like Solana ETFs could receive approval before the end of the year.
ETFs provide an alternative way to invest in cryptocurrency, and crucially, an option that's available to institutional investors that can't buy coins directly. Bitcoin and Ethereum, the first two cryptocurrencies that received spot ETF approval, have both seen sizable investments in their ETFs. Bitcoin ETFs have received inflows of $62 billion, and Ethereum ETFs have received $14 billion.
A risky buy with substantial growth potential
There are several things to like about Solana as a cryptocurrency investment. Its method of validating transactions gives it a significant performance edge over most other blockchains. That helps attract more users and developers. In fact, Solana was the top blockchain ecosystem for new developers in 2024.
If Solana ETFs get SEC approval, it will mean more money flowing into this cryptocurrency. Even though Ethereum has much more DeFi TVL, Solana has been making progress in this area.
While Bitcoin and Ethereum seem likely to continue leading the crypto market, I think Solana has plenty of space to grow. The current price is a solid buying opportunity, keeping in mind that this is a volatile asset and could continue to fall in the near future. Cryptocurrency, Solana included, is also high-risk. I wouldn't overcommit, but this could be a good time to pick up a few SOL tokens.
