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Is SOL Still a Good Buy After Red-Hot Solana Summer?

Solana (SOL) has been one of the ten best-performing cryptocurrencies of the past 30 and 90 days, with its 47% and 309% rises during these periods outpacing those of such larger coins as bitcoin, ethereum, cardano, XRP and BNB.

Its staggering rise is largely the product of the parallel rise of its native platform, Solana, a protocol that uses a novel proof-of-history consensus mechanism in order to make it a high-performance, “web-scale” blockchain. Since early May, Solana’s total value locked in has risen from $1 billion to a high of $12.2 billion in early September, driven by a corresponding growth in DeFi and NFT platforms using its blockchain.

Will the frequent outages eventually doom Solana?

It’s this combination of actual growth and rising hype that has pushed SOL to record high after record high, with the coin’s current all-time high of $213.47 being set on September 9. However, with SOL having shed 35% of its value (as of writing) since this peak, it begs the question of whether now remains a good time to buy the altcoin, and of whether ‘peak’ Solana has already come and gone.

On the one hand, it makes sense to have misgivings about the genuine long-term viability of Solana, especially after it suffered a 17-hour outage that was solved only by restarting its network. On the other hand, SOL continues to have considerable market momentum behind it, while it needs to be remembered that most other major altcoins have also experienced technical issues in recent weeks or months, meaning that we can hardly write Solana off for one denial-of-service attack.

Why Solana Remains A Good Buy, Even Now

It’s worth comparing solana’s 30-day chart with the charts of other big coins, just to get a clearer sense of how much it has outperformed the big boys in recent weeks.

30-day moving average (green), 200-day (yellow), relative strength index (purple). Source: TradingView

What the chart above indicates is that solana had enjoyed large jumps in the days and weeks leading up to September 9. By contrast, bitcoin didn’t have quite as much joy during the same 30-day period, while its falls since September 8/9 have been more or less just as pronounced.

Source: TradingView

Likewise, ethereum’s chart also shows a similar pattern to bitcoin’s. And one interesting thing to note is that, even though SOL has risen much more substantially in the past 30 to 90 days, its relative strength index (RSI) — an indication of whether its overbought or oversold — has remained consistent with other, larger coins. In other words, despite comfortably outperforming BTC and ETH (and other coins) in the past few weeks, solana isn’t currently overbought, suggesting it has further space to rise.

Source: TradingView

It’s also worth reiterating that solana has risen in price by over 4,000% in the last 12 months, while bitcoin has enjoyed a more ‘modest’ 300% rise and ethereum a somewhat more impressive 770% appreciation.

Obviously, a big reason why SOL has increased by such a big margin is that it’s a new coin that has started from a lower base. From a total value locked of only $1 billion in May (and $2 billion as recently as mid-August), it catapulted itself to $12 billion, before correcting down to $9 billion, as of writing.

What this obviously means is that DeFi dapps on Solana — such as Saber, SunnyRaydium and Orca — have enjoyed a comparable growth over the same period, while Solana-based NFT platforms such as Solanart have witnessed enviable expansion in recent weeks.

Source: Twitter

Such growth indicates why SOL has ballooned in value recently. But what’s most telling is that, with the total value locked in of the entire DeFi sector equalling $177 billion, Solana currently accounts for only 5% of the overall ecosystem. By contrast, Ethereum accounts for 70%, while Binance Smart Chain accounts for 9%. Assuming that Solana can capture a bigger share of the DeFi sector, there’s no reason why solana won’t see further price rises in the not-too distant future. Even if it would be unrealistic to expect it to overtake Ethereum anytime soon, there’s plenty of reason to believe that it can capture more market share from Binance Smart Chain.

As such, it remains a good time to buy solana. It looks set to experience further growth, and with its tokenomics expected to be marginally deflationary over time (assuming a high number of transactions and — by extension — a high number of token burns), it has a good chance of appreciating significantly in the future.

It’s Not All Sunny in Solana Land

Of course, not everyone is into Solana, and many critics would point to its recent network outage as an indicator that its growth may have peaked already. This occurred on September 14, when it was apparently hit by a coordinated denial-of-service attack, which froze its network for some 17 hours and prevented new blocks from being produced.

Attackers (using bots) managed this attack because Solana effectively doesn’t have a block-size limit or a fee market, so they could afford to spam its network with transactions, which the blockchain ultimately couldn’t handle (because validators ran out of RAM). Given that the Solana whitepaper boasts a maximum capacity of up to 710,000 transactions per second, the fact that this outage occurred seriously dents the credibility of its claims.

And since the outage, SOL has dropped from about $166 to a current price of $143, a fall of about 13.8%. This a bigger drop than the modest falls experienced by the likes of BTC and ETH during the same window, suggesting that SOL’s rally may have lost steam.

However, two things are worth pointing out. Firstly, big rival platforms such as Ethereum, Cardano and Binance Smart Chain have also experienced recent technical hiccups, from Ethereum’s bug-caused chain split to Cardano’s apparent problems with concurrency (processing more than one transaction at the same time). All of these platforms, as well as Solana, remain experimental networks that are testing and developing new forms of blockchain technology, with Solana’s mainnet remaining in beta. As such, the recent outage certainly isn’t fatal for Solana, and as with other chains, it will most likely bounce back.

At the same time, solana’s more recent price action is encouraging, with the cryptocurrency rising by just over 5% in the past 24 hours (as of writing). By contrast, major rivals such as BTC, ETH and ADA are either flat or down, suggesting that SOL continues to have more momentum behind it. And with its ecosystem looking like it will continue to grow, it therefore remains a good time to buy solana.

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CryptoVantage Author Simon Chandler

About the Author

Simon Chandler

Simon Chandler is a journalist based in London. He writes about technology, markets and politics, and has bylines for Forbes, Digital Trends, CCN, Wired, TechCrunch, the Verge, the Sun, the New Internationalist, and TruthOut, among many others. His Twitter handle is @_simonchandler_

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