The Solana ecosystem plays an important role in the market, with one of the fastest blockchains that processes over 65,000 TPS and a growing cryptocurrency, SOL. The high-performance network is a well-known Ethereum competitor, as the platform offers similar tools, such as smart contracts, for developers to create decentralized applications and NFTs. At the same time, it doesn’t struggle with scalability and gas fees, so many turn to Solana after working with Ethereum.
Unfortunately, the 2022 FTX collapse had a long-term impact on the market, including Solana, which faced disrupted operations and less investor confidence. Like with any other cryptocurrency, the price of SOL is affected by ecosystem growth and regulatory compliance, so it’s no wonder its value was affected by such an event.
However, with some more media coverage and developer interest, Solana has the massive potential to become the next Ethereum. But what about its price? Let’s see what factors influence it.
The increasing DeFi ecosystem
Decentralized finance (DeFi) is pushing for adoption and innovation in the cryptocurrency industry as applications use various coins. DeFi has been steadily growing in the past year, with projects like Aave, Lido, or Synthetix offering investors and regular users faster, cheaper, and more efficient ways to manage their assets.
Decentralized finance leverages smart contracts for programmability, tamper-proof data for immutability, and interoperability for DeFi protocol integration. This complex ecosystem provides the foundation for the future of finance, which drives more interest from investors in using cryptocurrencies within DeFi applications.
Solana received more attention due to DeFi growth since the blockchain’s institutional projects added an influx of capital and supported Solana’s high market capitalization. Some of Solana’s projects, such as Radyum, an automated market maker (AMM), contributed considerably to cryptocurrency’s price.
The changing technological advancements
The crypto industry constantly changes, with developers and worldwide teams working towards adoption. Just like Ethereum introduced the roadmap and approached various updates to make the network faster and more affordable, Solana also tapped into the world of innovation and brought significant changes to the blockchain with ZK Compression technology.
This new feature employs low storage needs and transaction costs through Zero-Knowledge Proofs. It allows developers to compress the on-chain state to reduce costs but avoid compromising the ecosystem’s security and performance.
Cryptocurrency projects with frequent updates are always preferred by investors because they showcase trust and potential for future profit, which is why Solana’s value established the cryptocurrency among the leading ones on the market.
The growing NFT craze
Although the first and most popular NFTs were based on the Ethereum blockchain, Solana became an excellent alternative for those seeking lower transaction fees and faster processing fees for selling and buying NFTs. The Solana NFT architecture offers a user-friendly environment called the Solana Program Library (SPL) through which anyone can start creating and selling their NFTs.
Solana has also had an early NFT adoption and merged towards community and collaboration, propelling collections like the Degenerate Ape Academy into the mainstream. Besides art NFTs, Solana is also popular for games like Star Atlas, NFT music platforms like Sound, and community-building ecosystems like Aurory.
The NFT craze of the market only contributed to the growth of Solana’s ecosystem and tools, which is why SOL prices also surged. Using Sol for buying and selling NFTs is affordable and allows investors to diversify their portfolios easily.
The need for sustainability
At first glance, the cryptocurrency industry doesn’t seem to affect the environment, but the truth is that the considerable amount of energy required for basic activities like mining contributes to a massive carbon footprint. Bitcoin, for example, is responsible for the equivalent of energy consumed by an entire country, which adds to the climate change problem.
Therefore, the need for sustainability in crypto triggered changes in current projects and the start of new green ones. Ethereum, for example, became more sustainable by approaching staking instead of mining, whereas Solana has been climate-focused since the beginning.
The Solana Foundation provides essential information about the network’s electricity consumption and carbon footprint, showcasing a decrease in harmful activities. The eco-friendly cryptocurrency is also an alternative to Bitcoin and Ethereum since it doesn’t require that much energy to function and is also fast and cheap. Solana is close to becoming carbon neutral, and the underlying organization is planning to fund further cuts of carbon emissions.
Will other cryptocurrency trends affect Solana prices?
Although Solana has plenty of applications and technologies to make it usable in the future, there might be instances in which the market will trigger a slowdown in its popularity. Unfortunately, the crypto market is also prone to volatility and bearish movements that affect prices.
At the same time, the growing regulatory uncertainty often clashes with times of low confidence and greater supply than demand, making it difficult for investors and traders to maintain their confidence in an asset like Solana.
In this case, portfolio diversification, which includes asset allocation spread over different sectors and token types, is recommended for people to successfully withstand the volatility. Solana is a great investment in this case, as it’s an altcoin whose technological advancements add to its value. At the same time, adding large-cap cryptocurrencies like Bitcoin and Ethereum is essential to maintaining a strong portfolio.
Regardless, Solana investors should expect its value to be affected by worldwide conflicts or problems in the financial industry. Still, as long as they correctly allocate assets and invest for the long-term, they won’t suffer the same impacts over volatility as others. Moreover, a well-developed portfolio helps protect assets from risks of cybersecurity and volatility.
What do you think about Solana’s profitability?
Solana is one of the most promising crypto projects on the market, offering innovative technologies and similar features to more prominent blockchains, such as Ethereum. However, using Solana is considerably more affordable and faster than its competitors, boosting its value. Various other market dynamics, like the increase of DeFi and the NFT craze, contribute to the rising SOL prices, making it an important investment for the future.