Solana has been one of the top-performing cryptos in recent days, up 20 percent compared to just 5% for Bitcoin. And that has led to renewed investor optimism for Solana, which had previously been a Crypto darling before the so-called 'crypto winter' hit last year. Solana is now up 136% for the year, a remarkable improvement from the previous year.
The big question, of course, is whether the underlying fundamentals support the rapid price appreciation of Solana over the past nine months. Now, here's a closer look at three factors that could lead to Solana soaring even higher.
With a metric, which is routinely used as a quick way to measure the relative strength of any blockchain, let's start with a metric. The TVL number is usually higher, and the blockchain is healthier if the TVL number is higher. And Solana has been absolutely crushing it lately. The TVL of Solana has now reached a new record high for 2023, completely changing the narrative surrounding Solana. A growing TVL number means users are more confident with 'locking' their money on the Solana blockchain.
The caveat here is that Solana is still only No. In terms of TVL, nine among all blockchains. With 54.5% of all TVL in the blockchain ecosystem, Ethereum is still the leading market leader. Solana commands a market share of just under 1%, compared with a market share of less than 1%. While TVL has a positive effect, it's important to remember that Solana still has a long way to go before challenging Ethereum.
How can we assess the relative stability of the Solana blockchain by examining institutional money flows, one of which can be used to measure the relative strength of the blockchain. Where do institutional investors invest their money? How do they choose to invest it? According to a recent analysis by CoinShares, Solana has now emerged as the Altcoin of choice for large institutional investors looking to diversify away from Bitcoin. In 2023, Solana has experienced 27 weeks of net inflows compared to just four weeks of net outflows.
This figure is even more impressive given that Ethereum is losing ground with institutional investors. The world's second-largest cryptocurrency has now seen seven weeks of net outflows, a clear signal that investors are looking to other markets. This is an interesting development to watch, as Ethereum has historically been the second-most popular cryptocurrency for institutional investors, trailing only Bitcoin.
Solana's recent client wins have had a big impact on the company's growth. Of course, the new partnership that everyone has been talking about is the one involving Visa Inc.. Visa has announced that it will use the Solana blockchain to settle US currency transactions. As more merchants accept stablecoins as payment methods, this partnership may become more valuable.
The Solana Pay network is now allowing shoppers to use the same functionality for Shopify Inc. If you're a Shopify seller and you accept USDC as a payment form, then any USDC transactions will be settled on the Solana blockchain. The big picture is that payment with stablecoins is becoming more popular, as evidenced by the launch of a new U.S. dollar stablecoin in August. Solana's performance is far ahead of the trend, he said.
Solana is renowned for its quick, low-budget transactions. The reason for Solana being labeled as a potential right out of the gate was that it seemed to do everything Ethereum could do but much faster and cheaper. And now we're beginning to see real-world implementations of this technology. That should be exciting for investors focused on long-term growth.
Although Solana's underlying metrics are improving, it's not too far ahead of ourselves, and we're not too far ahead of ourselves. At $23, Solana is 91% below its all-time high of $260. Moreover, Solana is still a very unstable digital asset. Even though Solana is up big for the year, a casual glance at the trading chart of this cryptocurrency shows some big swings both up and down over the past nine months.
I'm growing increasingly bullish on Solana's prospects, he said. As long as the numbers keep moving in the right direction, Solana could start to test its 52-week high of just under $40. If you accept the extra volatility, Solana could be a high-risk investment that pays off big later.