A lot of cryptocurrency traders have been looking into Solana (SOL) recently as the digital currency has proved a favourite with investors over the last few weeks. The altcoin booked net inflows of $7.1m in a week, according to data from CoinShares, and is widely being touted as a challenger to Ethereum. But what’s behind this new blockchain darling?
We have been hearing a lot recently about how Ethereum itself is going to be the new Bitcoin, but it looks like Solana is now challenging for Ethereum’s crown. Is it the young pretender, or is there something more here?
Solana has been on a huge run recently, hence the enthusiasm from traders. This has left it as the 10th largest cryptocurrency by market cap in a matter of weeks, but it could have some way still to go.
Has Solana come out of nowhere?
Unlike Ethereum, of course, Solana was worth, well, very little at the start of this year. That has changed remarkably quickly as it has become a hot property. It hit over $40 in April, took a little bit of a breather, and then has really soared in recent days, from around $20 to $71.68 at time of writing. It has reversed a six week trend which has seen many crypto traders starting to dispose of some of their more esoteric positions, or at least trying to!
Solana is a blockchain-based altcoin which has supported a number of projects that are seeing substantial capital investment. Mango Markets, which is a decentralised exchange that sits on the Solana blockchain, managed to raise $70m in a token sale, which seems to have attracted a lot of attention. Following on from that, an NFT artwork collection – the Degenerate Ape Academy – also successfully auctioned using the Solana tech.
Could this be the real deal?
Big sums of money and technology that is actually proving to be of use are what we look for with altcoins and blockchain at the moment. There are a lot of ‘me too’ projects out there, but Solana looks like it might be the real deal.
Some analysts are seeing more and more developers turning to the Solana utility. It is home to Serum, a decentralised exchange that was set up by the crypto billionaire Sam Bankman-Fried. That’s something else we also look for with an emerging altcoin – a big name investor, ideally someone who knows their way around the crypto markets, who is already backing it.
Serum is a cryptocurrency that is used by Bankman-Fried’s derivatives exchange and it is also getting plenty of interest. Veteran crypto players will know him as the head of Alameda Research, which he set up in 2017 after working for quant trading shop Jane Street Capital. He recently told Bloomberg that he sees Solana’s rise in value as just a “delayed reaction” as traders start to recognise its growing importance in the cryptocurrency eco-system.
Solana is certainly navigating new territory. It looks to us like the new kid on the block may actually have some legs to it. Traders need to be careful however, as there will be an equilibrium price out there, which represents its real market value. Expect a correction back to that at some point. But if Bankman-Fried is right, this is one altcoin that is going to stick around.
