The Solana project - a price analysis

Solana is one of the most popular projects of recent years. It is pushing hard and is one of the fastest blockchains out there. One development follows another.

Yet Solana is also a bit like a manic-depressive coin. There seems to be no measure of the rises, but no measure of the falls either.

Since there seems to be no way to tell, I dug right in.

The question I am trying to answer for the reader is: where is Solana going? Will it be a "road to nowhere" or a "stairway to heaven"?

• Solana's price rose from just a few dimes to more than €200 and then dropped to less than €10, but is now back above €100.
• Solana offers a fast and affordable layer1 blockchain, gaining ground in DeFi and NFT markets.
• Technical problems, such as regular network outages, damaged confidence in Solana and led to significant price drops.
• The bankruptcy of FTX, linked to Solana, caused a deep price drop due to selling pressure and an influx of Solana coins into the market.
• Despite challenges, Solana continues to grow, with new products such as smartphones, which could contribute to further price increases and a possible spot in the top three cryptocurrencies.

Inhoudsopgave

1. The price of Solana
2. Establishment and advance of Solana
3. The end of the bull market in 2021
4. Problems of Solana
5. The FTX debacle
6. The power of Solana
7. Prediction Solana

The price of Solana

Source: Coingecko

If you go to the price development of Solana looks you see that he went from a few dimes to over 200 euros. Then he dropped like a brick to less than a tenner. Right now he is in his "manic period" again. He is ticking above 100 euros again.

What can we learn from this? Well, that Solana can make rather strange leaps.

Yet this price trend does not come out of the blue. Therefore, let's take a look at an analysis of the Solana project. What drives the price of Solana, past and future?

Establishment and advance of Solana

Solana was founded by Anatoly Yakovenko and two others in 2017 with the goal of creating a fast and affordable layer1 blockchain based on their self-conceived proof of history concept. In 2019 they provided funding and in 2020 their testnet and beta mainnet went online.

In late 2020, this cryptocurrency finally started to rise a bit, from a few dimes to a few euros. In the bull market of 2021, this coin exploded and became worth more than 200 euros at its peak.

What was the reason for this sudden rise in popularity at this time?

Let's start by saying that Solana has a very powerful technology that is being used by more and more blockchains and tokens. Because of their speed, they leave many other blockchains behind and because of their affordability for a transaction, they are quickly gaining ground on DeFi and NFT, especially in a bull market, when there is a lot of trading.

This is the main reason for their meteoric rise at the time. Today, Solana's ecosystem is a range of more than 1,000 projects, with more than 300 in the field of NFT alone. Back then, they were on the rise in this regard as well.

Many projects also made the switch to Solana from more expensive and slower networks.

The more projects, the more users, the greater the demand for a cryptocurrency. The greater the demand, the higher the price. The law of supply and demand works fine in the world of crypto.

During this time, they nestled into the top five and it seemed like the sky was the limit.

The end of the bull market in 2021

Mid-November 2021 marked the end of the bull market and Bitcoin rapidly lost value, taking all the altcoins with it in its wake. This is a well-known phenomenon by now, with Bitcoin losing more than half its value in a relatively short period of time.

Consequently, the rest of the coins are becoming noticeably less valuable. Ethereum did remarkably well. It retained at least 25% of its value after the bull market and exceeded my prediction.

However, Solana collapsed completely, dropping to less than ten euros. That's a drop of more than 95%. That's a lot even for an altcoin and especially for such a popular coin with such a large ecosystem. So, what happened?

Problems of Solana

It will be known by now to many that Solana regularly in trouble . This "Ethereum killer" also knows the blessings of Japanese culture and in particular harakiri. We will list the problems and see where the shoe pinches.

It happens frequently that the Solana network is down and sometimes inaccessible for quite long periods of time. Sometimes it's an incorrectly set validator, other times an IDO, with bots doing too many trades. Then again, processing trades is a problem and then suddenly they suffer from duplicate trades.

Bots that coin mountains of NFTs already don't like the network either, and then the clock is no longer correct and consensus has become a problem. And then the validators strike yet again.

Let's leave that flat tire and that closed bridge aside for the moment.

Well, we could go on and on, but it seems clear to me that we're dealing with quite a problem here. Just imagine you have a lot of money in a Solana project and the network is down. Just imagine that your project is falling like crazy and you can't do anything because Solana is down.

This is one of the things that can firmly undermine confidence in the Solana project and cause the price to fall. Every time this happens again you see the price of Solana drop significantly in a short period of time. Somehow I feel that Solana has actually come apart at the seams a bit too quickly and it is actually a victim of its own success! They just can't handle the growth there. That's a very good sign, but also a sign that they need to plug the holes in their blockchain quickly. Time for a hiring spree! Or a canary in the coal mine testnet. After all, what blockchain network wants to be known as "the best amateur"?

The FTX debacle

Sometimes you're just unlucky. Whether your name is Anatoly, Vitalik or Satoshi, sometimes the dice just roll all ones.

So what does FTX have to do with Solana? Well, all sorts of things.

In late 2022, FTX went bankrupt. This bankruptcy dragged down, among others Solana along to the depths . There were several links between Solana and FTX. A week after the demise of FTX, Solana ticked up to 9 euros.

FTX had a sister company, Alameda Research, which also filed for bankruptcy. This one had invested quite a bit in the Solana ICO in 2021. So they had a lot of Solana coins. In bankruptcy, creditors want to see money and so all eyes are soon on their bag Solana. During this period there was a lot of selling pressure and it was very noticeable in the price of Solana. For a while there seemed to be no bottom due to the influx of Solana coins on the market.

Alameda Research had a Solana bag worth billions of dollars, which they were reportedly trying to use to keep the FTX token stable. Given the outcome, this was an expiration, but it did mean a much larger supply and thus falling price for Solana.

FTX had also set up another Solana investment fund. Because the price of Solana had fallen so hard, investors are becoming reluctant to invest money in such projects in the future.

During the demise of FTX, some significant events also took place on the Solana network. Probably the Terra terror was still fresh in their veins.

The NFT was wildly popular on Solana. Around 300K per day were coined before FTX crashed. After their demise they were only at around 20K per day.

Many investors emptied their Solana wallets in a blind panic during those days. The number of wallets dropped from more than a million to around 200,000. Activity on the Solana network thus declined visibly. Of course this is not so strange, they probably thought that Solana would soon follow Terra. Now Solana works very differently from Terra, but investors' brains did not. The number of new wallets naturally also decreased, there was an atmosphere of waiting.

The CEO of FTX, Sam Bankman-Fried, was also very deep into Solana. With the Solana projects on FTX crashing and the sister company Alameda Research, to which he was diverting funds, having to repay as much as possible, many Solana coins couldn't help but enter the market to accommodate creditors and the price plummeted.

The sun is shining pretty brightly for Solana by now, but Sam went from crypto billionaire and Sun King to selling fish in jail and smelling dirty as the Fisherking. Maybe he can issue the Mackerelcoin MKC.

The power of Solana

Solana is very resilient and it is definitely not standing still. If you look at the trends, it's really not that surprising that they can rise so fast.

After the tough time brought on by the bankruptcy of FTX, Anatoly Yakovenko stepped forward and stood up to the Solana community. Like a true leader, he kept his eyes tightly focused on the future and continued on the path they had long taken. The ones had rolled though and the time of the sixes yielded a fully resurrected Solana blockchain and price.

Raj Gokal, co-founder of Solana, also stood up for his brainchild. He emphasized that so many users and participants had already joined the ecosystem since its inception that they would come out of this together.

If at first it was only slightly, at the end of 2023 this cryptocurrency began its second advance and became visibly more valuable. The crisis was over.

Solana, meanwhile, had his first cell phone of his own, the SAGA smartphone, marketed for a sloppy $1,000. This didn't really take off at first because of the high price, but when each phone received an airdrop of the popular memecoin BONK from the Solana ecosystem, interest skyrocketed. This airdrop was now worth almost as much as the phone itself, so that was not surprising.

Buyers also got some NFTs for free, which made this SAGA extra popular since the NFT was really hot at the time. It was only a limited edition, and the price for the SAGA on eBay or so that you had to pay secondhand skyrocketed to triple the price or more.

Now Solana wants to launch a second smartphone at a more attractive price and probably in a higher print run.

When I look at these developments, I quickly see similarities with other large companies, which are starting to operate sideways activities, such as Google with its smartphone and a whole battery of other activities outside their normal search engine.

You could say that Solana is on its way to becoming a brand name of sorts, which is a sign of a strong network and a healthy dose of confidence in its own abilities. This puts Solana in the market as not just the next blockchain. They have become a serious player and show it in their powerful development, the expansion of their ecosystem and the number of users and developers.

Source: Solana

A small sample of their ecosystem shows the areas in which they all have applications in their network. Their strongest representation is in DeFi and NFT.

Many investors are seeing Solana all over again, and there could well be a Solana ETF, given its renewed popularity.

Prediction Solana

Since few new coins enter the market each year and most are already in place, there will be little dilution. In fact, inflation will decrease by 15% each year.

Because Solana can work with so many different subfields in the crypto world, the ecosystem is expected to keep expanding. The speed and low transaction costs will certainly contribute to this. Solana is, after all, a very technically strong blockchain.

However, their technique of speed can also work against them. Even though they can handle so many transactions per second, if there are more than that, the network obviously can't handle it anymore. If they keep throwing network outs it does their business no good. The time seems ripe by now to address this problem once and for all, given their size and price. Whoever is ranked #5 in CoinGecko also has responsibilities to investors. It's time for an alpha mainnet.

Meanwhile, they passed a strong player in smart contracts, Cardano. However, to catch up with the next one, Ethereum, they still need to go over ten times or so. Can they make it? Yes, I think so. Will they make it? It is more than likely that if Solana gets to 1,000 in this bull market, Ethereum will be worth considerably more as well. This run they are not going to overtake the king of smart contracts.

Will they ever be able to do that? I have my doubts. Ethereum is a strong network that is also never out, that this challenge is too early for Yakovenko and his. It may come one day, but I suspect that Vitalik Buterin understands very well what Ethereum's problems, that low speed and high cost, will be a thing of the past for the foreseeable future.

Solana has a good chance of settling into spot #4 on CoinGecko. There won't be much more in it for now, but should there be? Let someone else get into Ethereum killing!

The corresponding price range for the coming time is between 100 and 200 euros. If they go over that, they could temporarily even come third in the coming bull market. And that would be an incredible achievement for a blockchain that has only been around for about three years.