Is Solana the next Bitcoin?

Solana's price is sinking, but could it soar in the future?

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The stock market has officially entered bear market territory, and cryptocurrency prices are also continuing to sink. 

The good news, though, is that expensive investments are now much more affordable. The price of Solana (CRYPTO: SOL), for example, is down roughly 86% from its peak. If you've been on the fence about investing in crypto, prices are lower than they've been in a long time.

Solana may have been knocked down in recent months, but there are plenty of reasons why it's a strong investment -- and could even be the next Bitcoin (CRYPTO: BTC).  

Where Solana shines

Solana was one of the breakout stars of the crypto world in 2021, and it's also one of the fastest-growing cryptocurrencies. Although its biggest competitor is Ethereum (CRYPTO: ETH), Solana's most recent developments are helping it compete with Bitcoin, too.

Until recently, Solana was primarily known for its ability to host decentralized applications. Like Ethereum, it's a programmable blockchain that is home to everything from non-fungible token (NFT) marketplaces to decentralized finance (DeFi) projects and more.

Its lightning-fast speed and low transaction fees have helped it grow quickly. Many developers and users, frustrated with Ethereum's sluggish transaction times and high fees, have flocked to Solana over the past year.

How Solana is competing with Bitcoin

Recently, Solana announced the release of Solana Pay, a decentralized payment system that allows merchants to accept cryptocurrency as a form of payment.

Solana Pay could give Bitcoin a run for its money, as both are helping to usher in crypto as a form of payment. Solana Pay, however, does have some distinct advantages over Bitcoin.

For one, Solana Pay has very little impact on the environment, according to Solana developers. This is an area where Bitcoin has been heavily scrutinized, as the crypto giant uses more energy than some entire countries. Critics of Bitcoin have also pointed out that because it's so energy-intensive, it could be difficult for it to scale.

Also, Solana Pay transactions happen instantly and cost just a fraction of a penny. Bitcoin transactions, on the other hand, can take anywhere from 10 minutes to an hour to finalize, and fees are generally around $1 to $2 per transaction (though they can be much higher).

Is Solana the right investment for you?

Solana has plenty of strengths, but it's not the right option for everyone. Like all cryptocurrencies, it's still speculative at the moment, meaning nobody knows whether it will succeed over time or not.

Also, although Solana has certain advantages over both Ethereum and Bitcoin, it's still an underdog. Bitcoin is the most popular cryptocurrency in the world, with a market cap of roughly $394 billion. Ethereum is the most widely used blockchain for decentralized applications, and its market cap is around $132 billion. Solana, by comparison, has a market cap of just $10 billion.

Solana has also struggled with its network's reliability, having experienced several major outages in 2022 alone -- which has likely contributed to its sinking price. While developers are working to strengthen the network and fix these issues, many investors are understandably hesitant about its future.

In order to truly compete with Bitcoin and Ethereum, Solana will need to work through these growing pains and continue gaining new users. It's uncertain whether that will happen, though, which does make Solana a higher-risk investment.

If you're willing to take on more risk for the chance of earning potentially lucrative returns, Solana may be the right fit for you. Just be sure you're only investing money you can comfortably afford to lose, and double-check that the rest of your portfolio is properly diversified to limit your risk.

Solana isn't a good fit for everyone, but it has its advantages. Whether it will ever overtake Bitcoin is unclear, but it's already proven to be a strong player in the crypto world. By weighing the pros and cons and considering your tolerance for risk, it will be easier to decide whether it's the right investment for you. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Katie Brockman has positions in Bitcoin and Ethereum. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin, Ethereum, and Solana. The Motley Fool Australia owns and has recommended Bitcoin, Ethereum and Solana. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.  

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