Solana: should you ride the wave?

Tuesday, November 7, 2023

In the space of a month, the price of the Solana blockchain cryptocurrency has soared by more than 60%. However, there are many indications that this meteoric rise may not be sustainable.

A true renaissance. A year ago, everyone saw Solana dying. Closely linked to FTX, the blockchain was dragged into the fall of the now infamous US platform.

His cryptocurrency, the SOL, was losing more than 60% of its value, below $10, and above all, few investors believed in a possible "remontada".

And yet! Last week, the SOL price returned for the first time to its pre-FTX crash level (above $30), prompting a degree of euphoria on the markets and renewed interest in the project.

To top it all off, you may also have seen the study by one of the world's largest digital asset managers, VanEck, which anticipates a price rise to $3,200 (Yes, 100 times the current price) by 2030.

On the other hand, those who share the study often forget, or choose to forget, that in reality VanEck also anticipates a lower potential for SOL, which he puts at less than $10 by 2030 😅.

So here's why you should be wary of this rise, which many signals show is unlikely to be sustainable over time.

👉 The hype linked to "Breakpoint"

Every major crypto ecosystem has its Grand Mass, and Solana's, the Breakpoint, was held last week. These gatherings are always the occasion for announcements that are supposed to take a project into the "new dimension" 🚀.

A price spike was observed when it took place, before falling back slightly. The same phenomenon occurred during the two previous editions in 2021 and 2022, without subsequently being followed by a spectacular rise. 2023 seems to be no exception. So beware of euphoria!

👉 No notable improvements to the technology

Launched in 2020, Solana was conceived as a response to Ethereum's limitations: according to its creators, Ethereum is a very interesting blockchain, but its transactions are still too expensive and too slow. So they decided to launch a blockchain that was supposed to enable high-speed, low-cost transfers.

At first, it worked! So much so that the blockchain joined the category of potential "Ethereum Killer", i.e. the blockchain capable of replacing Ethereum.

But soon things started to get complicated and the network experienced multiple outages ⚡️. There have been nearly 10 since 2022! Imagine for a tech entrepreneur not being able to use the internet for several hours.

To remedy this problem, Solana recently launched a new type of validator ("Firedancer"), those that approve transactions on the blockchain, to avoid outages. But this will not be fully deployed until early 2024.

"Given the scale of Solana's technical problems, we could have expected more convincing announcements at Breakpoint," explains Stanislas Barthelemi, head of blockchain & crypto at KPMG.

It is also interesting to note that Visa's announcement at the beginning of September did not particularly result in overwhelming investor enthusiasm. The US payment network announced it was choosing Solana as one of the blockchains to conduct blockchain-based payment experiments.

👉 Speculation linked to FTX

One of the largest holders of SOL was none other than the FTX platform. Overall, no other crypto ecosystem had such a strong relationship with Samuel Bankman-Fried's (SBF) empire, which collapsed a year ago now.

The new directors in charge of restructuring FTX began selling off some of SOL's reserves in October. A phenomenon that is always conducive to moving the price: speculators can take advantage of this type of moment to buy cryptocurrencies, drive up prices and then sell on with a nice capital gain.

👉 Hope for a return to the top

During the last bull market (2020-2021), the prices of almost all cryptocurrencies hit all-time highs. SOL was one of them, with a record high of $258 in November 2021 🚀.

Regularly, many are hoping that SOL will return to these levels, thanks in particular to the arrival of new investors who would be afraid of missing the bandwagon. That's possibly what's happening right now 👀.

Heading 1

Heading 2

Heading 3

Heading 4

Heading 5

Heading 6

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur.

Block quote

Ordered list

Item 1
Item 2
Item 3

Unordered list

Item A
Item B
Item C

Text link

Bold text

Emphasis

^Superscript

_Subscript

This analysis is not investment advice. It has been prepared without taking into account your personal situation, particularly your financial situation, risk profile, and investment objectives.

Before investing in any product, investors should fully understand the risks involved and consult their own legal, tax, financial, and accounting advisors.

Become an insider

The best crypto news and analysis. Every week. 100% independent.

Everything that matters in crypto

The best news and crypto analysis. Every Week. 100% independent.

Tokens in this article

No items found.

Projects in this article

No items found.

In this category