Solana (CCC:SOL-USD) has fallen in tandem with the broader cryptocurrency market in 2022. In fact, at the time of this writing, Solana has lost nearly 40% year-to-date.
Along with the general bearishness toward cryptocurrencies at the start of the year, Solana has suffered from severe blockchain performance reliability issues that helped fuel the recent selloff.
While investors’ increasing aversion to risk in 2022 will undoubtedly play a role in its performance moving forward (and that of cryptos in general), is there reason to pay more attention to SOL heading into 2022?
Let’s take a closer look at whether you should consider buying Solana on the dip.
Solana’s Core Appeal
While the crypto has experienced some challenges lately, it does have plenty of utility and long-term potential. For example, “Solana is the fastest blockchain in the world and the fastest growing ecosystem in crypto, with thousands of projects spanning DeFi, NFTs, Web3 and more.”
“Fastest” is the key word here. It resembles my favorite cartoon character, Speedy Gonzales. As the fastest mouse in Mexico, there is no task that Speedy cannot handle, such as getting a cube of cheese.
His character embodies effectiveness, speed and execution, much like what Solana aims to do in the world of crypto. Only in the case of Solana, the critical functions it serves are more intricate than the simple acquisition of cheese.
Solana wants to be a key player in providing decentralized finance (DeFi) solutions and to support decentralized app (DApp) creation by developers. To achieve these goals, it combines a proof-of-history (PoH) consensus combined with a proof-of-stake (PoS) consensus of the blockchain.
In other words, Solana wants to improve scalability and provide low transaction costs within its ecosystem.
Solana Catalysts: Are They Enough to Keep It Afloat?
Amid the recent pain in Solana, some positive news has emerged that helps bolster its longer-term vision.
These catalysts include Coinbase’s (NASDAQ:COIN) listing of ORCA and FIDA — two tokens within Solana’s ecosystem — and an announcement by Phantom (the most popular blockchain wallet of Solana) that it raised $109 million in funding and launched its wallet application for Apple (NASDAQ:AAPL) smartphone users.
These are the type of fundamental factors that move cryptocurrencies. (They’re also the same kind of factors that move stocks).
Bottom Line on SOL
The network outages that occurred do not inspire confidence in the reliability of the Solana network. However, there is undeniable institutional support for the Solana ecosystem.
Regardless, I consider Solana to be very richly priced now. While it has plenty of utility — I like its innovative feature about the Proof of History (PoH) protocol and it has traction in DeFi — buying it is still too risky at more than $100 per coin.
At the end of the day, it should move in tandem with cryptocurrencies more broadly. And it hardly makes any sense to pay such a lofty price for it now.
On the date of publication, Stavros Georgiadis, CFA did not have (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.
Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.
