Should You Buy Solana Hand Over Fist While It's Below $200?

Should You Buy Solana Hand Over Fist While It's Below $200?

In the cryptocurrency world, all the recent attention seems to be going to Bitcoin. But there's been a better-performing digital asset investors can't ignore.

In the past 12 months, Solana (CRYPTO: SOL) has skyrocketed nearly 800%, which would have turned a $1,000 investment into $9,000 in just one year. As of this writing, SOL, Solana's native token, is off 26% from its 2024 peak. The market seems to be taking a breather, even though this is currently the fifth-most valuable blockchain on Earth.

While it trades below $200, is it time to buy this innovative cryptocurrency hand over fist?

A unique blockchain

There are virtually an unlimited number of cryptocurrencies out there. While the vast majority are useless projects, maybe even outright scams, Solana stands out from the crowd. This is a truly unique network.

Like Ethereum, Solana operates with a proof-of-stake (PoS) consensus algorithm. This is designed to be an energy-efficient method of processing transactions that relies on token holders to approve new blocks. PoS makes Solana more functional and useful when it comes to decentralized applications (dApps), like non-fungible tokens and decentralized finance protocols.

Ethereum's main blockchain can handle only 14 transactions per second (TPS). Solana, on the other hand, can process a jaw-dropping 50,000 TPS. Because it can track the time of its transactions with much less of a data load, its speeds are unmatched in the crypto space.

Introducing use cases

In my opinion, a cryptocurrency's viability depends entirely on its ability to create real-world use cases that people value. Sure, financial speculation has driven the narrative thus far, but if a token has any chance of lasting success, it needs to introduce utility.

Solana is aiming to do this with a mobile strategy. It launched the Saga, its first web3-enabled smartphone, in April last year, with a second edition currently accepting preorders. The sole intention is to get more users onboarded to crypto. Essentially, Solana is aiming to boost the accessibility and convenience of its dApp ecosystem. Higher demand for the SOL token would result in a higher price.

I'm not overly optimistic about Solana making any meaningful splash in the smartphone market. The adoption rates are probably tiny at this point. Furthermore, I simply don't see any reason large numbers of consumers would move away from their Android or Apple devices.

However, there's one area where I think Solana has some potential. I'm talking about the payment sector. In early 2022, Solana Pay was launched. Utilizing the blockchain, this system directly connects a consumer and a merchant. The almost-free transactions are settled instantly.

This is a major win for merchants because it can result in higher profits. Money that goes to traditional payment processors can flow to the bottom line. Plus, it allows these businesses to develop direct connections with their customers in innovative ways. For example, instead of getting a receipt upon purchase of a pair of new sneakers, a customer could receive an NFT that provides certain perks and benefits from the merchant.

Remember these things

While I do think Solana has potential, investors need to remember some things. Only those who understand and accept the risks should buy this digital token. There is still a ton of uncertainty as we look ahead.

Make sure the position is small enough that it doesn't cause you to lose sleep at night. This means it should be part of a well-diversified portfolio. And most importantly, always maintain a long-term mindset.

Should you invest $1,000 in Solana right now?

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Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.