We’ve made it clear, here at InvestorPlace, that we like Solana (SOL-USD) and Cardano (ADA-USD). Both projects offered their own distinct flavor of a promising long-term investment. Now, SOL and ADA are down about 30% after the Terra (LUNA-USD) collapse…having already taken a beating in the past six months, far more than Bitcoin (BTC-USD) or Ether (ETH-USD).
In a bear market like this, investors large and small have gotten burned. $57 billion was lost in LUNA and its TerraUSD (UST-USD) stablecoin alone! Now, capital is bound to be a lot choosier where it goes next…whether in funding rounds or on the crypto exchanges.
So, it’s worth asking: In this brutal market, will Solana and Cardano survive to fight another day – and keep building towards their long-term potential? Let’s take a look.
I featured SOL in March, along with Polkadot (DOT-USD), as “Two of the Best Cryptos to Pick In This Crazy Market.” Since then, of course, things only got crazier… And Solana continued to rack up wins – but may have gotten too big for its britches, so to speak.
Both of the core, long-term attractions for SOL remain intact:
- Solana still, far and away, leads the pack in Developer Activity on the blockchain. Even Ethereum is seeing half the developer activity of Solana on a given day.
After all, Solana transactions are simply much faster – not to mention cheaper.
- Crypto luminaries are still shining their light on Solana: most notably, Sam Bankman-Fried of FTX (FTT-USD). Most recently, his Crypto Bahamas bash featured a Solana hackathon that drew hundreds of developers.
Solana was even chosen for Instagram’s new NFT feature, along with Polygon (MATIC-USD). “Individuals on the platform will be able to connect their wallets and display NFTs that they own, which will show collection and artist info in the description,” as our crypto analysts report in their most recent update for their Crypto Investor Network.
But Solana’s popularity has also highlighted its vulnerabilities. In September, December, and in April, Solana was flooded with bot activity that brought the network to a crawl – or brought it down completely. Meanwhile, Ethereum, like Bitcoin, “has a near perfect uptime record since its inception,” Blockworks reports.
In the most recent outage, Solana was a victim of its own success in attracting NFT trading activity.
Even Solana’s own validators have taken to Twitter to vent that “For months we’ve seen congestion issues on Solana [as] bots try to snipe [NFT] mints and immediately relist on secondary market places for $$… The validators keep getting flooded,” and “at some point the network just can’t anymore.”
Naturally, Solana developers are working on “mitigations.” But all the while, Solana’s leading NFT marketplace, Magic Eden, is having trouble monetizing its popularity:
As of this week, “Magic Eden users are transacting at greater rates than on OpenSea, [but] the lack of blue-chip NFT projects on the Solana system has led to lower total sales volume,” reports CoinDesk.
OpenSea – where you can trade NFTs on Ethereum and Solana – is “seeing $35 million of sales volume compared to Magic Eden’s $10 million. The average price of an NFT traded on OpenSea was also over $700, well above Magic Eden’s average price of $123.”
If Solana can’t win on NFTs, can it ever be a true Ethereum killer? To survive, Solana needs to maintain its edge in transaction costs and speed – even through Ethereum’s big upgrade, the Merge. However, it can’t be so aggressive on cost and speed that it keeps attracting more transactions than it can handle. It’ll be a delicate balancing act, for sure.
Then there’s Cardano, with practically the opposite scenario:
Cardano is taking so long to build out, the buzz around its ADA crypto tends to come not from news – but from its leader, Charles Hoskinson, and army of true believers pounding the table on Twitter and Reddit. They’ll pop into any crypto discussion to angrily insist that Cardano is the one true blockchain.
There’s a strong argument to be made that they’re right about this. The advantages and ingenuity of Cardano are very clear when you research the blockchain, as in this report from Kraken crypto analysts. And given the struggles of Solana… not to mention the brief rise and gut-wrenching fall of Terra Luna… Cardano’s slow and steady approach might be worth a second look.
The reason there’s been a “slower development rollout” on Cardano, as Kraken explains, is that “Cardano fosters a culture based on academic peer-review and formal verification, emphasizing security, reliability, and sustainability.” When Cardano launched smart contracts, for example, “the peer-review process took almost four years,” as Messari analysts note in their latest report.
Cardano’s values mean that it’s also designed quite differently than its peers. It’s more like “a PoS-based, smart contract-enabled version of Bitcoin…than an iteration on Ethereum,” Kraken notes.
Given that Ethereum has dominated the New Digital World for years – crypto developers tend to be much more familiar with Ethereum Virtual Machine (EVM) based projects. Cardano even uses a different programming language, called Haskell. In exchange for “reliability and security benefits, Haskell has a notoriously small network of developers due to its more complex nature.”
This means that Cardano developers have to build a lot of the infrastructure they need from scratch…leading to – you guessed it – “extended development times.”
Team Cardano argues that its superior technology will attract more government, banking, and corporate clients to its blockchain. Some of the other cool features include “liquid democracy,” staking within smart contracts, and the ability for users to create their own native tokens directly on Cardano’s base layer. If you’re interested, you can read all about them in the Kraken report.
In the meantime, ADA has a major catalyst coming up:
Cardano is making its Vasil hard fork on June 29, with a dress rehearsal on its “testnet” by the end of May. It will be a huge upgrade because, right now, its intricate design has led to “issues with crashing and wait times,” Messari explains.
“The upcoming Vasil hard fork can potentially change DeFi scalability challenges by increasing throughput, enhancing the smart contract codebase, and making storage more efficient. The upgrade will drastically boost transaction throughput, volume, and liquidity,” Messari concludes.
Because Cardano laid out these upgrade phases from the beginning – each with their own fancy name – every upgrade has brought a fresh wave of buyers.
Here you can see a handy chart showing how “ADA’s price has always rallied strongly leading up to the update,” as the author describes on Seeking Alpha. Afterwards, ADA takes a dip, but overall it’s climbed significantly since embarking on its “Shelley era” in mid-2020.
We’ll have to see how ADA fares this time around – and how SOL faces its own set of obstacles. Today, though, our crypto analysts put out an alert to our Crypto Investor Network as to which of their cryptos is the best buy now. To see their pick (and the reasoning behind it), go here to learn more and join their membership today.
On the date of publication, Ashley Cassell 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. To have more news from The New Digital World sent to your inbox, click here to sign up for the newsletter.