SOL

Should You Buy Solana While It's Below $150?

The Solana (CRYPTO: SOL) cryptocurrency reached multiyear highs in March 2024. But after popping above the $200 mark a couple of times, the smart contracts platform dropped back below $150 due to a fresh round of inflation-fighting economy concerns.

Solana is currently trading at roughly $134 per digital coin. Should crypto investors treat this price dip as a buying opportunity or back away from Solana in the spring of 2024?

Why Solana plunged in 2022 and 2023

Think of Solana as that friend who was always hanging out with the popular kid in school. That popular kid was FTX, a big-deal crypto exchange run by the slightly eccentric but seemingly brilliant Sam Bankman-Fried. FTX loved Solana, promoted it a lot, and they seemed unstoppable together.

But then, there was a sudden plot twist. FTX collapsed in a mess of bad decisions and questionable practices. (Think of it as the financial version of finding out your popular friend was cheating on all their tests.) Nearly 20% of the failing crypto-exchange's balance sheet consisted of Solana coins, making it FTX's second-largest financial asset.

Then, Solana was caught in the aftermath of the FTX meltdown. Now, can the digital coin establish its own identity after that intense drama, or will it always be associated with its fallen partner?

Only time will tell, but investors have largely forgiven Solana for its FTX-based sins.

Signs of better days ahead

In the darkest days of the FTX scandal, alongside the inflation-flavored economic crisis of 2022, Solana fell 96% below its record highs. After a strong climb in recent months, tempered by a significant drop in March and April, Solana has gained 1,280% since the end of 2022.

A consortium of private equity groups recently bought out the Solana coins from the FTX bankruptcy estate. Meanwhile, Sam Bankman-Fried was sentenced to a 25-year prison term, and his influence has evaporated from the crypto sector.

There are few direct ties to the troublesome FTX organization now, and Solana looks ready to move on. The obvious follow-up question is how quickly app developers in the crypto space could be ready to follow suit. And on that note, Solana is doing quite alright.

Data from DeFiLlama shows that the total value locked (TVL) in Solana-based decentralized finance (DeFi) projects now matches the TVL in the spring of 2022. It's a tenfold increase from the rock-bottom developer interest in early 2023.

Dominant rival Ethereum (CRYPTO: ETH) has a similar pattern going on but with a shallower trough over the last 1 1/2 years. And Solana has fared a lot better than many other smart contract challengers such as Avalanche and Polygon -- both largely stuck near their dried-up LTV interest in 2023.

Is Solana a reasonable investment in 2024?

Past performance is never a guarantee of future results, especially not in the unpredictable cryptocurrency market. That said, Solana looks ready to rock in the long run, based on its healthy developer interest and robust coin-price recovery from the FTX scandal.

Now it's up to the Solana coin and its developer community to keep that momentum going during the crypto market's cyclical upswing. You can almost set a four-year clock by the crypto sector's ebbs and flows, following the predictable rhythm of Bitcoin reward halvings. The fourth one is happening this week, almost surely followed by higher crypto prices and a broader general interest in anything blockchain-related. People pay close attention to big numbers, you know.

Solana's recovery could hardly have come at a better time.

All things considered, I think this so-called Ethereum killer looks ready to take advantage of the crypto sector's ongoing surge. Most DeFi projects may still prefer the Ethereum protocol, but Solana's high-speed transactions are turning heads right now.

I can't promise market-beating gains, but grabbing a modest number of Solana tokens during this price dip seems likely to make investors some serious money over the next couple of years -- assuming that the project can keep a foot on the accelerator.

Should you invest $1,000 in Solana right now?

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Anders Bylund has positions in Bitcoin, Ethereum, and Solana. The Motley Fool has positions in and recommends Avalanche, Bitcoin, Ethereum, Polygon, and Solana. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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