Make no mistake about it, Solana (SOL -1.97%) is ending the yr with a bang. Up greater than 900% in 2023, Solana lately handed XRP (XRP -1.40%) to turn out to be the fifth-most useful cryptocurrency in the world. Solana now has a $43 billion market cap, and seems to be rising a lot sooner than anybody may have predicted a yr in the past.
So simply how a lot increased can Solana go? There’s now a case to be made that Solana is on tempo to go Ethereum (ETH -2.28%) to turn out to be the second-most useful cryptocurrency, trailing solely Bitcoin (BTC -1.51%). That may signify an enormous paradigm shift in the crypto world, on condition that Ethereum has traditionally performed the position of “digital silver” to Bitcoin’s “digital gold.” But there are already indicators that this paradigm shift is underway. Let’s take a better look.
NFT proof
The primary proof of this potential paradigm shift comes from the world of non-fungible tokens (NFTs), an space the place Ethereum has historically dominated. The 2 most well-known NFT collections — the Bored Ape Yacht Club and the CryptoPunks — are discovered on the Ethereum blockchain. Traditionally, they’ve been the hottest collections for NFT buying and selling and have been dependable benchmarks for a way the general NFT market is performing.
But they’re not the market leaders. The final time I checked, a frog-themed NFT assortment for the Solana blockchain had handed the Bored Ape Yacht Membership by way of 24-hour gross sales quantity. And different Solana NFT collections are performing effectively over longer seven-day and 30-day home windows. In truth, in accordance to CryptoSlam knowledge, Solana is almost tied with Ethereum by way of 30-day NFT gross sales quantity.
DeFi proof
A lot the similar story is true in the world of decentralized finance (DeFi), the place Solana seems to be narrowing the hole. This can also be an space the place Ethereum has traditionally dominated. However at the finish of December, Solana handed Ethereum by way of DeFi for the first time ever.
Over each a seven-day and 24-hour interval, decentralized exchanges on the Solana blockchain noticed extra buying and selling quantity than decentralized exchanges on the Ethereum blockchain. This is especially hanging, on condition that Solana has by no means made DeFi a core precedence. Granted, a lot of this quantity seems to be coming from the shopping for and promoting of Solana meme cash, however it’s nonetheless fascinating to be aware.
Institutional buy-in
Furthermore, institutional traders seem to be lining up behind Solana as effectively. In accordance to CoinShares, which tracks institutional cash flows out of varied cryptos, the sample all through 2023 has been the inflow of recent cash into Solana. At the similar time, these massive institutional traders seem to be scaling again their publicity to Ethereum.
As a sign of this institutional buy-in, Cathie Wooden of Ark Make investments lately appeared on CNBC speaking up the deserves of Solana vis-a-vis Ethereum. Merely acknowledged, Solana is a sooner, cheaper model of Ethereum, and so it solely is sensible that it needs to be gaining market share in key areas. Should not the finest know-how win? If that is the case, then the valuation of Solana may soar.
Thoughts the hole
Though Solana does seems to be gaining floor on Ethereum, an enormous chasm in market cap nonetheless separates them. Whereas Solana has a market cap of $43 billion, Ethereum has a market cap of greater than $280 billion. For Solana to go Ethereum in market cap, one thing extraordinary wants to occur, past simply the seize of some factors of market share in the world of NFTs or DeFi.
And funding agency VanEck appears to have the reply. That “one thing extraordinary” is the launch of a killer app for the Solana blockchain that’s able to onboarding 100 million customers. That quantity would possibly sound preposterous, however take note it solely took ChatGPT two months to purchase that many customers this yr.
If Solana finds that killer app, says VanEck, its future worth may skyrocket by greater than 10,000%. Assuming that Solana continues to achieve share at the expense of Ethereum in key market niches, VanEck tasks that the worth of Solana may strategy $3,200 by 2030 in contrast with right this moment’s worth of about $100.
A $1 trillion valuation for Solana?
If you happen to multiply that worth of $3,200 by Solana’s present circulating coin provide of about 429 million, that provides you a determine of $1.4 trillion as a projected market cap. So a valuation of greater than $1 trillion is actually inside grasp for Solana. That is the final bull case situation, after all, however it’s nonetheless fascinating to take into account.
If you’re excited about investing in Solana, maintain a detailed eye on metrics that present that Solana is certainly narrowing the hole with Ethereum. Monitoring the gross sales numbers of digital frogs or digital apes would possibly sound foolish, however knowledge like this might sign whether or not an actual paradigm shift is underway. A number of years from now, analysts is likely to be speaking about Solana as the subsequent trillion-dollar asset.
Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Idiot has positions in and recommends Bitcoin, Ethereum, Solana, and XRP. The Motley Idiot has a disclosure policy.