Is Solana a Security and Why Should It Matter to Investors?

David Heredia February 20, 2024
Is Solana a Security and Why Should It Matter to Investors?

Solana (SOL), also known as the Ethereum (ETH) killer, has captivated investors with its blazing-fast transactions and burgeoning ecosystem. But with the crypto market’s unpredictable nature, a crucial question arises: Is Solana a good investment in 2024? Should you join the SOL train or watch it whiz by from the sidelines?

This blog delves into the intricacies of Solana, examining its market position and potential for growth. By exploring its strengths and weaknesses, we aim to provide a comprehensive overview that will assist you in deciding if SOL deserves a spot in your portfolio.

Exploring whether Solana is a good investment 

To understand if Solana stands out as a good investment, let’s navigate its current market dynamics, examining its price prediction, historical patterns, and potential for investors.

Solana price prediction: Current market dynamics

Solana is currently ranked as the fifth-largest cryptocurrency, according to CoinMarketCap. Its market cap stands at approximately $63.9 billion, with a 24-hour trading volume of around $2.36 billion, indicating significant liquidity and trader interest in the market.

Moreover, according to data from Artemis, Solana’s total value locked (TVL) stands at $1.9 billion, showcasing substantial engagement and investment within its ecosystem.

Looking at the current market situation, since mid-October 2023, SOL has shown a remarkable bullish momentum. The asset has been on an upward trajectory, underpinned by active buying pressure and investor confidence. The onset of 2024 introduced bearish pressure across the cryptocurrency landscape, affecting SOL as well.

Despite experiencing several dips below the critical $87 to $90 threshold last month, the weekly chart analysis revealed that bulls have successfully defended this range. The positive momentum was further evidenced by the price’s movement towards its peak resistance level at $118.

At the time of writing, SOL was trading at $112, marking an increase of over 6% in the last week. The price action was corroborated by trading volume trends. A recovery in volume paralleled the price increases. This suggested that the rallies were not only supported by speculative interest but also by tangible buying activity.

The Chaikin Money Flow (CMF) has remained above the zero line since March 2023.  As the analysis concluded, it registered at 0.15. Despite occasional dips, the Awesome Oscillator (AO) predominantly stayed positive, with a current value of 49.04. This further corroborated the bullish sentiment prevailing in the market.

SOL historical patterns 

Solana’s price history encapsulates a dramatic journey of volatility, innovation, and market sentiment that has shaped its position within the cryptocurrency space and can help in predicting future trends. Reflecting on its initial phase, shortly after its debut, SOL experienced a significant drop, reaching its all-time low (ATL) of $0.5008 on May 11, 2020.

The summer of 2021 marked a pivotal moment for the asset, with its price more than tripling. SOL reached its all-time high (ATH) of $259 in November 2021. This was propelled by the non-fungible tokens (NFTs) hype and growing demand within the decentralized finance (DeFi) community.

However, this peak was short-lived, and by the end of 2022, much of Solana’s gains had evaporated. The financial turmoil surrounding FTX, which was a significant player in the Solana ecosystem, led to a massive sell-off of SOL to avoid bankruptcy, heavily impacting its price.

The aftermath saw Solana’s price plummet to as low as $8 in December 2022. Yet, the resilience of Solana’s underlying technology and community became apparent in 2023. Starting the year at approximately $10, SOL witnessed a gradual recovery as confidence began to rebuild.

By the end of 2023, the price had astonishingly closed at around $100, showcasing not only the recovery but also the enduring belief in Solana’s value proposition. Moreover, over the last month, the price has appreciated over 16%, signifying continued market optimism.

Estimate your potential returns from investing in Solana with our Solana Profit Calculator, a useful tool for any prospective or current investor.

Solana’s future potential

Solana has shown promising signs of potential growth in 2024. The platform has outperformed other leading layer 1 (L1) blockchains in transaction fees and social volume. Additionally, its weekly decentralized exchange (DEX) volumes increased by more than 10%.

When it comes to social engagement, on-chain data highlighted that Solana again led above Ethereum and Tron (TRX). This prominence suggested that Solana is among the most sought-after projects in the space.

Moreover, data indicated that leveraged bullish positions constituted a significant portion of the open interest in futures for SOL, potentially setting the stage for a long squeeze event. In the past week, the volume of futures contracts betting on the rise of SOL has surged to a record high of $1.7 billion, with bullish investors driving this momentum.

However, it’s quite well known that Solana is prone to network outages. The most recent outage happened on February 6. During this period, SOL’s price experienced a 4% dip. However, it subsequently bounced back.

How high can SOL go in 2024?

Since mid-December, SOL’s price has been consolidated between $118 and support at $89. Price consolidation often precedes a breakout in financial markets. For SOL, a bullish breakout could drive its price to $120 in the short term.

Given the continued presence of an optimistic market,  SOL can likely reach as high as $175 in the medium to long term. Conversely, if a bearish trend overtakes the market, SOL could drop as low as $70.

Delve into the future prospects of Solana and explore whether SOL has the potential to reach $1000 by 2040, giving investors a long-term perspective.

Benefits of investing in Solana

Here are some benefits associated with investing in Solana:

  • High performance: Solana offers high transaction speeds and scalability thanks to its Proof-of-History (PoH) and Proof-of-Stake (PoS) mechanisms. This makes it a fast and efficient blockchain network.
  • Growing ecosystem: The platform’s rapidly expanding ecosystem of Solana Program Library (SPL) tokens and decentralized applications (dApps) attracts a wide range of developers and users.
  • Lower transaction fees: Solana’s significantly lower transaction fees compared to other networks make it a cost-effective choice.
  • Potential for adoption: The network stands out as an attractive option for businesses and large-scale applications, hinting at a strong potential for wider adoption.
  • Community and developer support: A strong, active community and substantial developer backing contribute to continuous improvements and innovations on the Solana platform.
  • Staking rewards: Solana offers staking rewards for securing the network, providing an opportunity for passive income alongside potential capital appreciation.

Risks of investing in Solana

Investing in Solana, like any cryptocurrency, involves certain risks that potential investors should consider:

  • Market volatility: The price of SOL can be highly volatile, with rapid price fluctuations that can lead to significant gains or losses in a short period.
  • Regulatory risks: The regulatory environment for cryptocurrencies is still evolving, and future regulations could impact the adoption and value of Solana.
  • Competition: The blockchain and cryptocurrency market is highly competitive, with numerous platforms vying for adoption and market share, which could affect Solana’s growth and relevance.
  • Security risks: While blockchain technology is generally secure, there’s always a risk of security vulnerabilities, hacks, or attacks that could compromise the network or assets held on it.
  • Technical issues: Solana’s consistent technical challenges and network outages in the past can impact investor confidence and token value.

Gain perspective on Solana’s potential through the eyes of industry executives who remain optimistic despite its recent outages.

best crypto to buy in 2024

Verdict: Should you buy Solana in 2024?

So, is Solana a good investment for you, and should you buy it in 2024? The answer, as with most things in crypto, is a nuanced “it depends.” This blog has equipped you with the knowledge to make an informed decision based on your risk tolerance, investment goals, and understanding of the ever-evolving crypto landscape.

Remember, cryptocurrencies are inherently volatile, and past performance is no guarantee of future results. Do your due diligence, weigh the risks and rewards, and chart your own course with Solana.

Compare Solana with Ethereum to understand their differences and similarities as leading Layer 1 solutions, aiding in your investment decision-making process.

Disclaimer: This blog represents the author’s personal opinions and should not be taken as financial advice. Please consult a qualified financial advisor and evaluate your individual circumstances and risk tolerance before making investment decisions.

David Heredia