In 2023, Solana (encryption:sol) It was one of the best-performing cryptocurrencies, rising more than 900%, easily surpassing the 150% rally. Bitcoin (Crypto: Bitcoin). There were even suggestions that Solana was on his way out Ethereum (Crypto: ETH) As the second largest cryptocurrency in the world.
But the narrative changed this year. Yes, Solana's price is still up 80% so far, but there are serious questions being asked about its current valuation. With that in mind, here's a closer look at two key factors that could determine Solana's price trajectory over the next nine months.
Meme coin mania
The main factor pushing Solana higher at the moment is the meme currency craze. The poster dog for this madness is Bonk (Crypto: bonk), which rose more than 1,000% in less than 30 days last year. But there are plenty of other cryptocurrencies that have delivered similarly impressive returns, including another dog-wearing-a-hat meme whose price is up 1,300% this year.
Apparently, Solana has suddenly emerged as the blockchain of choice for new meme coins. As a result, it seems like new get-rich-quick memes are being launched daily.
On the one hand, token mania has led to increased activity and development on the Solana blockchain, pumping up all of Solana’s core metrics. For example, the number of wallets containing Solana tokens has skyrocketed, the daily transaction volume is off the charts, and the volume of daily trading activity on Solana decentralized exchanges has exceeded the amount on Ethereum decentralized exchanges.
On the other hand, meme mania has led to a flurry of speculative activity that may or may not be sustainable. Things got so out of control that Anatoly Yakovenko, co-founder of Solana, felt the need to step in and tell people to “stop doing it.” He was particularly concerned about people sending Solana coins to anonymous digital wallet addresses, all in the hope of obtaining new meme coins at pre-sale prices (i.e. before they start trading on exchanges). For stock investors, this would be like transferring money to an anonymous trader in New York City who claimed to have access to an exciting new company before it went public.
Solana can't quite put an end to the meme-coin craze, as it has arguably been one of the main factors behind its popularity over the past 12 months. But it needs to do something about some of the most common scams in the cryptocurrency market, including the dreaded “carpet operation” (where creators of a new meme suddenly disappear with investors’ money).
Solana mobile strategy
The second key factor to consider is Solana's mobile strategy. This is one area where Solana has a competitive advantage over every other major blockchain, including Ethereum. Last April, Solana officially unveiled the $1,000 Saga Phone, a “cryptophone” optimized for the Solana blockchain. Out of the gate, sales of the device were slower than expected, and Solana eventually cut its price by 40% just to attract buyers. It turns out that most people — surprise, surprise — weren't willing to pay the same price for an untested encrypted phone as they were paying for a traditional smartphone.
But Saga sales suddenly skyrocketed at the end of last year (thanks in part to meme mania), and Solana began 2024 by announcing a second-generation Saga at a more reasonable price. Pre-sale orders for this new phone recently reached 100,000, and some analysts now believe Solana can break even on its mobile strategy with an annual sales volume of 250,000. It's a huge bet, no doubt, but if it pays off, it could be crucial in keeping Solana price track.
The next step, of course, would be to find a “killer app” for this encrypted phone. This should be a completely new application for blockchain and cryptocurrency users, and not available on traditional smartphones. According to investment firm VanEck, such a killer cryptocurrency app could unlock massive value for Solana, sending its price soaring to more than $3,200 — nearly 17 times recent prices.
What's next for Solana?
How and whether Solana resolves these two key issues will be crucial to its growth and sustainability. If you find a winning strategy, its price may rise significantly. If it doesn't, cryptocurrency investors may discover that Solana's price could fall just as easily as the price of the more speculative memecoin.
I remain optimistic about Solana's prospects. An all-time high of $260 appears to be within striking distance, and some are predicting that Solana's price will rise to $1,000 during this cryptocurrency rally. As long as you are aware of the risks and volatility involved, Solana may be worth a close look in your cryptocurrency portfolio.
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Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.
These cryptocurrencies soared in 2023. Will they continue to shine in 2024? Originally published by The Motley Fool
