Expect Solana to beat out Tether and Binance Coin to just behind Ethereum, rising over 50% in the next year
Even though Solana crypto (SOL-USD) is up substantially this year. It is now the fifth-largest crypto by market cap, it’s likely to keep accelerating. The crypto has had a truly spectacular ride in the last 4 months.
Since July 19, when it was at $23.49, Solana is now over 10 times this price at $240.93, as of late Nov. 14.
The chart above shows the parabolic move of Solana crypto in the last 4 months.
At $73.1 billion, Solana is now neck and neck with Tether (USDT-USD), a stable coin with a $73.8 billion market value. It’s also higher than Cardano (ADA-USD) with a $68 billion market cap.
What is Driving This Spike?
Solana’s open-source decentralized blockchain is clearly making major inroads with smart contracts, as well as in Defi (decentralized finance) and NFTs (non-fungible tokens). It’s picking up market share from Ethereum (ETH-USD), the second-largest crypto in this decentralized functional arena.
Another reason for the huge Solana spike is that its crypto transaction speeds are much faster than Ethereum and its transaction costs are much lower.
One reason for this is the way that Solana handles transaction validations. For example, Cointelegraph magazine explains it like this:
Solana can process transactions as they come as opposed to waiting for a block to be filled, which can be a lengthy process. This enables Solana to be more scalable, processing more transactions than some other blockchains.
As a result, Solana can process up to 50,000 transactions per second. Compare this to 30 transactions per second for Ethereum and even 24,000 per second for VISA, as the chart below shows.
Moreover, Solana’s website shows that its transaction cost is 0.025 cents per transaction ($0.00025). This is substantially lower than Ethereum’s. For example, Y Charts shows that Ethereum’s average fee is $4.666 per transaction as of Nov. 15.
So, you can see that new app developers will now seriously consider using Solana’s blockchain. As a result, Solana is picking up a massive market share.
Total Value Locked
One way to measure this is with the concept of Total Value Locked (TVL).
TVL keeps track of “how much money is locked inside a specific protocol, in the form of liquidity pools, collateral held, or simple deposits,” according to Decrypt magazine.
That shows that Solana is still well behind Ethereum. However, that’s not the point. The next closest is Binance Coin (BNB-USD), which has just $21.7 billion in TVL. vs. $14.6 billion at Solana.
In other words, Solana is quickly catching up to the third-largest market value crypto, Binance Coin.
Note that DefiLlama indicates there is a total of $273.7 billion in TVL. This means that Ethereum has a 66.8% market share (i.e., $183 b/$274b) and Solana has a 5.3% market share (i.e., $14.6b/$274b).
We will use these figures below to value Solana crypto.
Where This Leaves Solana
It’s not just because of transaction speed and costs. Solana is now a major player with NFTs.
I have written several articles about Solana's rising role in the NFT marketplace and its growing valuation as a result.
I recently predicted that Solana could rise another 50% to $378 per share or a $114 billion market cap.
Here is a very simple model to help explain my reasoning.
Right now Ethereum has a 67% market share in the TVL arena, as shown above. Let’s assume that Solana, given its fast growth rate, can double its market share over the next year to roughly 11%.
Therefore, Solana should be able to have a market value that is roughly one-sixth of Ethereum’s (i.e., 67% mkt share at Ethereum / 11% Solana mkt share = 6.0).
Next, let’s assume that Ethereum rises 20% to a market value of $667 billion (i.e., $556 b x 1.2 = $667b). Therefore, Solana will have a market cap of $111 billion (i.e., $667b/6).
This means that Solana will rise from $73 billion in market value over the next year to $111 billion, or up 52% from here.
That will put the market cap above Binance Coin’s $109 billion market cap.
Now, obviously, this is a rough and problematic model. For one, if Ethereum and Solana rise in value, it’s likely Binance Coin will do so as well. In addition, it may not be realistic to assume that Ethereum won’t grow its market share if Solana’s doubles.
But, a model is a simplistic way of seeing things and it helps put things in perspective. The point is that if Solana’s market share picks up due to its faster speeds and lower costs, its TVL market share is likely to grow quicker than Ethereum’s.
We have shown there is a mathematical basis for Solana to rise another 50% in the next year or so, making it the third-largest crypto behind Ethereum.
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This is not financial advice and you should not rely on my analysis to buy or sell any stock or crypto, as I am not undertaking to induce you to buy or sell securities.
I am relying on the “publisher’s exclusion” in the Investment Advisers Act of 1940 to provide this information without any personalized or individualized investment advice.
This represents my analysis of Solana crypto and it is not meant to provide you with specific advice in your own situation. I do not presently own Solana or related securities, but I may buy some of these in the coming weeks.