Solana (CCC:SOL-USD) crypto remains the best bet as the major cryptocurrency which could outperform in 2022. This is after it has now almost 100 times the price where it ended last year. For example, SOL crypto was at $183.67 late on Dec. 9. But on Dec. 31, 2021, it was at $1.8429 per SOL token.
Nevertheless, don’t expect to see another 100 times run this coming year. One reason is that Solana crypto now has a market capitalization of $52.8 billion.
This makes it the fifth largest cryptocurrency out there, just after Tether (CCC:USDT-USD), with its $76.15 billion market cap. But it is higher than Cardano (CCC:ADA-USD) at $42.34 billion in market value.
Where Solana Could End Up Next Year
There really is no room — in terms of market cap — for Solana to run up another 100 times as it did in 2021. That would give it a market valuation of $5.66 trillion, which won’t happen.
However, it is at least theoretically possible for SOL crypto to move 10 times higher in 2022. That would give it a $566 million market cap and would put it on a par with Ethereum (CCC:ETH-USD). As of Dec. 9, Ethereum’s market cap was at $496 million.
Could this happen? There is certainly a good deal of momentum behind Solana. Its fast transaction speed and low costs make it a competitor to Ethereum. I wrote about this last month, showing that based on its total value locked (TVL) criteria, it could move higher.
For example, Ethereum, despite its huge gas fees per transaction, has about $164 billion in TVL. This means that many people still have $164 billion in wallet deposits, non fungible tokens (NFTs), and smart contracts (mostly for staking purposes) in Ethereum. This is according to the latest data by DefiLlama.com.
By contrast, Solana only has $11.67 billion in TVL, according to DefiLlama. This means that Solana still has a huge upside in terms of gaining market share away from Ethereum.
In other words, it would not at all be impossible for Solana to pick up another $100 billion in TVL. For that to happen, it is likely the price of SOL crypto will rise substantially.
Using Market Cap/TVL to Value Solana
Here is how that math could work. Ethereum’s market value compared to its TVL is equal to $496 billion/$164 billion. That works out to a ratio of 3.02 times. Let’s assume that Solana moves up to $100 billion in TVL. That would put its market value at $302 billion (i.e., 3.02 x $100 billion TVL). This assumes that it will have the same ratio.
This represents a market value that is 5.34 times its present $56.55 billion market cap. Moreover, I suspect that SOL crypto would actually garner a higher ratio than Ethereum’s three times Cap/TVL ratio. So at four times TVL, SOL crypto would have a $400 million market cap, or 7.1 times its present market cap.
So here you can see that it is mathematically, theoretically possible for SOL crypto to rise seven times or higher next year.
What to do With SOL Crypto
The net result is that investors should seriously consider taking either a toe-hold stake in SOL crypto or to average down into their holdings. The upside potential seems highly probable, given the prospects that I outlined above.
Investors should not be put off by the past rate that SOL crypto has risen. In fact, in the last month, Solana peaked out at $260.06 per SOL token on Nov. 6. Since then it has drifted lower and closed at $181.18 on Dec. 9.
So, this provides a good entry point for new investors in the cryptocurrency. It is also a substantial crypto with $52 billion in market value. It is not as if the crypto will crumble in a short period of time. There are simply too many use cases, and its appeal is too high for that to happen.
The bottom line is that investors can expect SOL crypto to move substantially higher next year based on an expected large increase in its total value locked metric.
On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and Newsbreak.com and runs the Total Yield Value Guide which you can review here.
