Should You Buy the Solana Cryptocurrency While It's Still Below Its $262 Peak?

A genuine threat to Ethereum

Decentralized apps are increasingly popular in industries like financial services, where removing human decision-making can create a fairer experience for all customers. Each app is governed by smart contracts, which are slivers of computer code that enforce the rules underpinning its core functions. Smart contracts exist on the Solana or Ethereum blockchains, and they typically can't be changed, so no person or entity can manipulate a particular app.

The Solana and Ethereum networks themselves are also fully decentralized. They are hosted on thousands of individual nodes (computers) spread across the world, ensuring consistent uptime even if some were to suffer an outage. This is preferable to hosting the network inside a single centralized data center, because even the best infrastructure only promises 99.9% uptime.

Solana has a couple of clear advantages over Ethereum. Ethereum uses a proof-of-stake (PoS) validation mechanism, meaning a network participant must put up their own coins as collateral if they want to earn rewards by validating transactions on the blockchain. The validator earns interest on their staked coins, but they will lose them if they try to manipulate the blockchain.

Solana also uses PoS, but pairs it with a proof-of-history (PoH) mechanism that encodes every transaction with a timestamp, allowing the network to validate much faster. Therefore, Solana can process thousands of transactions every second, whereas the Ethereum network starts experiencing congestion at around 15 transactions per second, which leads to a sharp increase in fees.

Is Solana a buy under $262?

When someone uses a Solana-based decentralized app, they activate smart contracts and must pay fees to cover the associated computing costs. These fees are payable in Solana coins, which effectively means demand for the cryptocurrency will increase organically as the network expands. Therefore, Solana's value should theoretically rise over the long term so long as more people use the decentralized apps running on its network.

But the number of daily active wallet addresses on the Solana network peaked at 6.5 million in November 2024, and has since halved to around 3 million as of this writing. The downtrend isn't very promising, and it might explain why the value of Solana is down by over 50% from its high.

But on the plus side, Ethereum is only seeing around 536,000 daily active wallet addresses at the moment, which suggests Solana has become more popular because of its faster speeds and lower costs. Still, there needs to be greater adoption of decentralized apps overall in order to increase the value of both ecosystems.

Unfortunately, no decentralized app has truly achieved mainstream adoption yet. The average person has probably never heard of the Jupiter crypto exchange or the Magic Eden marketplace for non-fungible tokens (NFTs), which are two popular apps built on Solana. Until there is a broad selection of apps that appeal to the needs of everyday consumers, the majority of people will simply never engage with the Solana ecosystem.

For now, speculative investors might have more influence over Solana's value than its actual fundamentals, so its trajectory from here will be difficult to predict. However, it could still be a good long-term buy for investors who believe in the future of decentralized apps, especially while it's trading so far below its all-time high.