Solana (SOL) Price Prediction: Can It Scale New Heights? (2024)

Solana first went public via its initial coin offering (ICO) in April 2020, entering the crypto market at an initial price of $US0.9511. It quickly garnered attention for its innovative technology, promising a scalable solution for decentralised applications. This potential was not unnoticed, as the price of Solana soared, reaching an all-time high of $US260 on November 6, 2021.

However, the volatile nature of cryptocurrency markets soon left their mark. The 2022 bear market was not kind to Solana, causing the value of the SOL token to decline over 90% from its 2021 highs. In particular, the collapse of FTX, a significant cryptocurrency exchange with deep ties to Solana, triggered a sharp decline in SOL’s value. The coin lost over 50% of its value overnight, a stark reminder of the interconnected risks within the crypto ecosystem. This event led to Solana’s price dipping below $US10 in late 2022, casting doubts on its future.

Despite these challenges, Solana has demonstrated an ability to rebound. The last quarter of 2023 marked a significant turnaround for the coin, propelling its price above $US120 for the first time in years.

As of June 6, 2024, SOL is trading above $US170, a resurgence that reflects not merely market dynamics but also the underlying strength and improvements within the Solana network.

“A 300% rise in the last 12 months has seen Solana firmly entrench itself as a top five coin by market cap,” CEO of CoinJar, Asher Tan, tells Forbes Advisor.

This turnaround can be attributed to several factors, not least of which was the platform’s almost full-year of network uptime. After a series of outages plaguing Solana, causing frustration among users and investors alike, the network has stabilised.

“A series of outages now seemingly behind them, increased platform stability, and a SOL price rally has provided some vindication for Solana holders entering 2024,” Tan adds.

As we peer into the crystal ball, Solana’s trajectory for the year ahead appears optimistic with plenty of opportunities for significant advancements. The past year has laid a solid foundation for Solana, setting the stage for what could be an unprecedented period of growth and innovation.

One of the most compelling narratives around Solana’s rise is its increasing dominance in the decentralised finance (DeFi) and non-fungible token (NFT) sectors.

“Volumes in decentralised exchanges (DEX), NFT trading, and stablecoins on Solana have started to rival or have overtaken those on Ethereum,” says Tan.

Solana’s ability to match or even surpass Ethereum in these critical aspects of the blockchain economy indicates a robust and scalable infrastructure capable of handling significant transaction volumes, a crucial factor for its continued adoption and growth.

The NFT market, in particular, has been a battleground for innovation and competition among various blockchain platforms. Solana’s aggressive foray into this space has not gone unnoticed.

“In the NFT segment, despite heavy competition from Bitcoin’s Ordinals and the incumbent Ethereum, Solana has closed the gap on both chains,” Tan adds.

With its high throughput and low transaction costs, Solana provides a compelling platform for NFT activities, positioning it as a strong contender for leading the market in 2024.

“It has an opportunity to end 2024 with the largest majority of NFT volume if it can continue its recent trajectory,” Tan says.

“Airdrops and attractive DeFi yields from applications on Solana have been major contributors to this inflow of capital.” Many projects building on Solana have successfully mastered the art of marketing to crypto investors, attracting them through high yields and point systems that promise an airdrop in return for using their app.

Over the past few months, active Solana users have been rewarded with significant airdrops from multiple projects. Most notably, users of Jito and, more recently, Jupiter Exchange, received airdrops worth upwards of $10,000. These efforts have been pivotal in drawing an influx of capital, further energising the ecosystem. Tan adds: “A rise in bridged funds from other Layer-1 chains, particularly over December 2023, is a great example of this.”

As we explore the future prospects of Solana, it’s imperative to balance our perspective by considering both the bullish and bearish viewpoints:

The Bull Case

Like many up and coming blockchain platforms, Solana’s success is often viewed through the lens of its comparison to Ethereum, which leads the category for blockchain smart contract platforms.

“Ethereum’s dominance and market share are not purely from being the first mover. Savvy governance has made it the platform of opportunity, largely powering the ICO wave in 2017-18 and much of the memecoin action in 2020-21,” Tan says.

“[Ethereum] provided a template for success; lower barriers to entry and a thriving developer community are key ecosystem elements to capture the imagination and drive the price.” So far, Solana has managed to emulate Ethereum’s “template for success” in many ways, which is now reflected in its thriving ecosystem of innovative projects, meme coins, community engagement and active developers.

“Memecoin successes like $BONK, which reportedly led to a sold-out Solana phone, have already proven that SOL has been able to replicate some of the hype that was built on Ethereum,” says Tan.

Solana has become the go-to platform for meme coin launches and trading activity over the past six months, with hundreds of new coins launching every day with the help of fair launch platforms like pump.fun.

This replication of Ethereum’s success formula—lowering barriers to entry and fostering a thriving community—suggests a bullish outlook for Solana as it continues to carve out its niche in the competitive blockchain space.

The Bear Case

However, it’s crucial to consider the challenges and trade-offs that have accompanied Solana’s growth. When considering the blockchain ‘trilemma’, which refers to the challenge of achieving a balance between scalability, security, and decentralisation in a blockchain network, it is clear that Solana has sacrificed decentralisation for scalability.

“Despite architecture decisions that have seen trade-offs in decentralisation and, at times, stability, Solana’s compromises have so far worked in their favour,” Tan says.

Tan explains that these concessions, while helping it to reach a larger audience with cheaper fees and lower barriers to entry for users, “ultimately rest on the premise that a Layer-1 blockchain is the solution the market needs”.

The proliferation of Layer-2 solutions on Ethereum addresses many of the criticisms levelled against Ethereum’s scalability and throughput, offering a counterpoint to the necessity of Layer-1 solutions like Solana.

Furthermore, Ethereum’s successful transition to Proof-of-Stake, known as ‘The Merge,’ exemplifies its ability to overcome significant challenges.

“While Ethereum has managed to navigate difficult engineering and public perception challenges like ‘The Merge’ to Proof-of-Stake, Solana’s relatively short operating history has yet to see its leadership tested in the same manner,” Tan says.

Uncertainties surround Solana’s capacity to navigate future challenges, particularly in an environment where its architectural compromises could be tested against the evolving demands of the blockchain market.

The explosion in memecoin launches and subsequent trading activity has resulted in network congestion, drastically increasing the rate of failed transactions on Solana. In April, the team released several updates to help alleviate the issues, but they didn’t entirely solve the problem. This is something Solana will need to address to reach the next level of adoption.

The future outlook for Solana contains both promise and potential hurdles. The bullish case rests on its demonstrated ability to captivate the market’s imagination and emulate aspects of Ethereum’s successful growth strategy. Conversely, the bearish perspective raises important questions about the sustainability of its architectural choices and untested leadership in the face of potential challenges.

The investment potential of Solana is a topic of considerable debate within the cryptocurrency community. With its innovative technology and active ecosystem, Solana has captured the attention of investors looking for the next big opportunity in the blockchain space. As Tan notes, Solana’s cutting-edge technology and the optimism of its community are central to its identity and appeal.

“In a cyclical industry that is easily influenced by novelty, Solana has bags of it,” Tan says.

“Still, a lot of gains over the past year have been from cannibalising off other chains’ weaknesses.” While effective in the short term, this strategy raises questions about Solana’s long-term sustainability and ability to forge a distinct and enduring position in the market.

The critical challenge for Solana, Tan adds, is its ability to shape the narrative of future technological cycles. For Solana to truly usurp Ethereum or any other leading platform, it must become the birthplace of groundbreaking decentralised applications that capture the market’s imagination and drive widespread adoption.

Despite these uncertainties, Tan points to the continued evolution and commitment of the Solana project, noting: “Even if Solana doesn’t emerge as a dominant force anytime soon, at the very least, the second Solana mobile phone has been hinted for a 2025 release.”

This anticipation of future product releases indicates an ongoing effort to innovate and expand Solana’s reach, contributing to its appeal as a potentially valuable investment.

Determining whether Solana is a good investment depends on several factors, including one’s appetite for risk, investment horizon, and belief in the platform’s technological and market potential. While Solana presents a compelling case with its innovative features and community enthusiasm, investors must also weigh its challenges in achieving long-term dominance. As with any investment in the volatile cryptocurrency market, thorough research is critical and speaking with a financial advisor before making a decision is always recommended.

This article is not an endorsem*nt of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency or CFDs as an investment class. Cryptocurrency is unregulated in Australia and your capital is at risk. Trading in contracts for difference (CFDs) is riskier than conventional share trading, not suitable for the majority of investors, and includes the potential for partial or total loss of capital. You should always consider whether you can afford to lose your money before deciding to trade in CFDs or cryptocurrency, and seek advice from an authorised financial advisor.