Bitcoin (CRYPTO: BTC) has experienced four “halvings” since 2012, events that reduce the rewards for mining the cryptocurrency and are seen by bulls as major catalysts due to their impact on Bitcoin’s supply.
In the 12 months leading up to its latest halving on April 19, Bitcoin’s price surged by 109%, boosted by expectations of lower interest rates and the approval of the first spot price Bitcoin ETFs this January. However, since the halving, Bitcoin’s price has dipped by about 2%. This decline suggests that many investors bought Bitcoin ahead of the halving, but the lack of new catalysts has deterred further investment.
Instead of focusing solely on Bitcoin, investors might want to consider smaller cryptocurrencies that have shown more significant gains. One such token is Solana (CRYPTO: SOL), which soared by 472% in the 12 months before Bitcoin’s halving and continued to rise by another 8% in the subsequent months. Is it a no-brainer buy right now?
The Difference Between Bitcoin and Solana
Bitcoin is mined using an older, energy-intensive proof of work (PoW) method. In contrast, Solana and other newer cryptocurrencies like Ether (CRYPTO: ETH) use the more efficient proof of stake (PoS) method. PoS blockchains support smart contracts for decentralized apps (dApps), games, non-fungible tokens (NFTs), and other crypto assets, allowing tokens to be staked for rewards. PoW tokens are primarily valued for their scarcity, while PoS tokens derive their value from the growth of their ecosystems. Thus, investors generally favor PoS blockchains for their higher transaction speeds and lower fees.
Why Investors Are Excited About Solana
Solana is the fastest PoS blockchain, surpassing Ethereum with its proof of history (PoH) method. This innovation allows Solana to process transactions 46 times faster than Ethereum and five times faster than Polygon (CRYPTO: MATIC). Despite only reaching about 1.6% of its theoretical maximum speed, Solana’s speed is driving rapid ecosystem expansion.
Solana supports decentralized exchanges like Jupiter and Orca and popular meme coins like BONK and WIF. It helps Visa (NYSE: V), PayPal (NASDAQ: PYPL), and Circle settle stablecoin transactions and has integrated its Solana Pay payment protocol into Shopify’s (NYSE: SHOP) services. Additionally, Solana launched the Saga Phone, an Android smartphone for Web3 apps, featuring its own dApps Store.
Will Solana Overcome Its Near-Term Challenges?
Solana has faced several challenges, including network congestion, security issues, and the fallout from the collapse of FTX, one of its major backers. However, Solana’s developers are addressing these issues with updates, and the liquidation of FTX’s Solana tokens is complete. If interest rates stabilize or decline, the cryptocurrency market may recover, benefiting Solana.
Is It the Right Time to Buy Solana?
Solana appears to have lost some momentum following Bitcoin’s ETF approvals and halving, but this lull may present a buying opportunity. With its clear advantages over Bitcoin, Ether, and other PoS tokens, Solana holds long-term potential.
Should You Invest in Solana Now?
Before investing in Solana, consider this: The Motley Fool Stock Advisor analyst team has identified what they believe are the 10 best stocks for investors to buy now, and Solana isn’t one of them. The selected stocks have the potential for significant returns. For instance, an investment in Nvidia in 2005 would have yielded substantial gains. Stock Advisor provides a blueprint for building a successful portfolio with regular updates and new stock picks each month, outperforming the S&P 500 since 2002.
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