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PrimeXBT Principal Analyst: Solana (SOL), Crypto’s Dark Horse Seeking to Challenge Ethereum (ETH)

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PrimeXBT Principal Analyst: Solana (SOL), Crypto's Dark Horse Seeking to Challenge Ethereum (ETH)

Among the top 20 coins that fell victim to crypto bloodshed last week, one coin managed to survive relatively unscathed: Solana Blockchain (SOL).

Not only was it not a victim of the carnage, SOL even managed to make a profit of around 60% for the week, a very impressive record when most other coins were posting losses of between 20% and 50%. In fact, SOL also managed to post a record daily percentage gain in Sunday’s sell-off that caused Bitcoin (BTC) to lose 6%. This is due to a very strong uptrend that is sending the token to new all-time highs on a constant basis.

For those unfamiliar, SOL is another smart contract-capable blockchain that has been seen as a worthy challenger to Ethereum (ETH). It uses a proof of history consensus combined with the underlying proof of stake consensus.

SOL provides reward incentives for SOL token holders who stake their tokens to help protect the network. Another incentive for SOL validators is an inflation adjustment mechanism that was launched in February. SOL has an initial annualized inflation rate of 8%, where newly minted tokens go to validators and bettors in proportion to their stake amounts. The inflation rate is designed to decrease by 15% each year to 1.5%.

Thus, SOL already provides the deflationary token economics that ETH will only achieve after the implementation of its token burn update in July, making SOL immediately attractive to investors interested in betting on the returns of a deflationary asset.

Another point that makes SOL a worthy competitor for ETH is its higher performance. While ETH can currently handle around 18 transactions per second (TPS), SOL claims to be able to handle 65,500 transactions per second (TPS). As such, SOL has been one of the key blockchains that has been able to capitalize on ETH’s network congestion problem due to its much lower throughput, which in turn makes transaction fees very high on the market. ETH blockchain as users try to outdo each other to get their transactions processed earlier.

SOL’s ability to handle a larger load has also made the platform a cross-chain destination for projects like Civic and the popular USD Coin (USDC) and Tether (USDT) stablecoins. USDT was an early adopter of SOL and this has given it a lot of support.

As the issues surrounding the ETH blockchain persist, many platforms have relied on other blockchains – BSC and SOL have been the biggest beneficiaries so far. While BSC has been more in the spotlight due to high-profile news that PancakeSwap is beating Uniswap, SOL is not far behind either. DeFi platforms such as Raydium and Serum have launched on SOL, and there is a growing list of projects transitioning to the web.

SOL got another boost in early April when its native wallet, Sollet, launched a Chrome extension. The extension offers the functionality of the SOL ecosystem that reflects the way MetaMask works for ETH, making interaction with the blockchain much more convenient.

The number of cryptocurrency wallets that support SOL is also growing at an enviable rate, a sign that cryptocurrency developers, not short-term speculators, support the project. Prominent wallets such as Exodus, Ledger, and Blockfolio already offer support for the token. A recent integration with the Phantom wallet has also brought new excitement to the SOL ecosystem, as it will allow the creation of non-fungible tokens (NFTs), bringing to the network one of the most popular sectors of the cryptocurrency market.

Development activities are also energetic at SOL. According to the data, it currently ranks fourth behind Chainlink (LINK), Elgorand (EGLD), and Bitcoin (BTC) in the number of developer confirmations on Github, a sign that the project is very much alive and improving.

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However, despite having solid fundamentals and a ranking of 13 in the top 20 cryptocurrencies, SOL does not have as much hype and fanfare compared to other popular tokens, resulting in much less hype. This, in turn, leads to a much less degenerate trading community compared to other highly leveraged tokens like BTC or XRP, which have actually worked in SOL’s favor. The token has been rising steadily this year without speculators noticing and therefore has a much less leveraged investor profile. This becomes especially important when the market in general is experiencing a sell-off.

SOL does not experience as much liquidation compared to other popular tokens among retail investors. This may explain its resilience during the week of rapid price drops and bloodbath seen in other tokens.

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For example, during April 18, a market-wide settlement day worth $10 billion, SOL contracts only accounted for about 2% of total market sales, at just $18 million. of your settled futures contracts.

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Even during the sell-off induced by Biden’s tax proposal between Thursday and Friday, when the market saw liquidations of around $3.7 billion, SOL only saw 34 million in liquidations, which were distributed equally between long and short positions. . This says a lot about the SOL trader’s profile, which is quite balanced and less leveraged than those who trade BTC, ETH, XRP and DOGE, which suffered massive sell-offs.

With solid fundamentals, although not as hyped as the other tokens on the market, SOL could be a solid investment for investors who find the current market volatility a bit unsettling. For investors who have invested in ETH and can find an alternative smart contract blockchain to invest in, SOL may be a good option.

About Kim Chua , PrimeXBT Principal Market Analyst :

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Kim Chua is an institutional trade specialist with a track record of success that extends to major banks including Deutsche Bank, China Merchants Bank, and more. Later, Chua launched a hedge fund that consistently achieved triple-digit returns for seven years. Chua is also an educator at heart who developed her own proprietary trading curriculum to pass her knowledge on to a new generation of analysts. Kim Chua actively follows crypto and traditional markets closely and is eager to find future trading and investment opportunities as the two very different asset classes begin to converge.


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