Right now, it’s understandable to think more declines are in store for Solana (CCC:SOL-USD). Following its recent 17-hour outage, and given the shaky ground crypto finds itself on right now? Despite its rapid drop from nearly $215, to around $134.50 today, another double-digit percentage drop could be ahead.
Don’t assume, though, that it’s the beginning of the end for this altcoin. In a matter of months, it’s become one of the top challengers to Ethereum’s (CCC:ETH-USD) DeFi (decentralized finance) dominance. Its token price may pull back further in the near-term. But its chances of becoming the ultimate “Ethereum killer” remain high.
How so? For starters, the underlying advantages of this token’s blockchain. Namely, the greater scalability it has relative to Ethereum. Second, as a result of its fast transaction speeds, DeFi and dApp (decentralized app) developers are flocking to it.
Third, and most importantly, it’s seeing a considerable amount of institutional support. As more institutional money pours into it, any sort of additional pullback could be short-lived. You may want to take a “wait and see” approach with it today. Yet as much remains in its corner, keep it on your radar.
Solana, its Network Outage, and Possible Stormy Times Ahead for Cryptos
It went on a parabolic run from late August through early September. But as you likely know, it’s been a rough past few weeks for SOL-USD. Much of this is due to the volatility that’s hit the crypto market in recent weeks. Between the Sep 7 flash crash, the crisis with Evergrande Group (OTCMKTS:EGRNF), and other market-wide concerns, investors in this space have been taking profit, and taking some risk off the table.
However, the Sep 14 Solana network outage applied its fair share of pressure to it as well. What exactly happened? The root cause of the 17 outage had to do with the IDO, or initial DEX offering, of Grape Network. With many using bots to participate in the offering, flooded the network. The network’s developer was able to quickly troubleshoot the situation, as it got itself back online within 24 hours.
Even so, only time will tell whether this is merely a near-term hiccup, as our Alex Siriois called it. Or, if it’s a warning sign, as my InvestorPlace colleague Mark Hake argued a few days after the incident. That said, it may not be this headline-making event that causes more near-term pain for those long SOL-USD.
Instead, chances are it’ll be continued fear, uncertainty, and doubt (FUD) in the markets that will cause further short-term declines. If you bought in at lower prices, should you join the crowd, and take profit now? Not exactly. You may see some additional paper losses in the short-term. But staying long, ahead of it joining Bitcoin (CCC:BTC-USD) and Ethereum in the $100 billion+ club, could still be a worthwhile move.
Despite Recent Hiccup, Much Remains in its Corner
As discussed above, there’s still much on the side of Solana. Its recent outage notwithstanding, with its unique Proof-of-History (PoH) protocol, this blockchain can process 50,000 transactions per second. Its clear-cut speed advantage points to more and more developers moving to its platform for their DeFi/dApp projects.
In turn, these strengths are what has, and will continue to make it, an altcoin institutional money is throwing its chips behind. The Sep 14 incident hasn’t stopped SOL-USD from still seeing net inflows from digital asset investment products (like crypto exchange-traded funds, or ETFs). Beyond funds buying it, a few months back, this token’s developer raised $314 million to further its development, from a group of investors, including venture capital firm Andreesen Horowitz.
Admittedly, while it has plenty in its corner, it’s going to need more than this to catch up to Ethereum. The top altcoin, with its recent London Hard fork, and forthcoming 2.0 upgrades, it may be able to keep competition from this potential “killer,” as well as another top contender for the crown, Cardano (CCC:ADA-USD), at bay.
It’s got a lot of work ahead of it, and it’s a long road ahead. Keep this in mind, as after its recent epic run-up, it may take time for it to make another major leap higher.
Hold it if You Own it, Dive in on The Next Dip if You Haven’t Bought it Yet
In the near-term, if crypto continues to struggle, don’t expect SOL-USD to perform the way it did last month, going into this month. But long-term? If the outage issue doesn’t reverse recent trends (developer adoption, institutional inflows), this altcoin may still be on its way to becoming the top “Ethereum killer.”
With much on its side, if you already own Solana, your best move may be to hold onto it. If you haven’t bought it yet? Any weakness in the near-term may be a good time to buy.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.