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Could investing $10,000 in Solana make you a millionaire?
Solana (SUN -1.43%) has minted many millionaires since its launch in 2020. The cryptocurrency began trading at $0.95 and reached its all-time high of $260.06 on November 6, 2021 – which would have turned a investment of US$10,000 in US$2.74 million.
Solana was widely seen as an alternative to Ethereum (ETH -1.32%) for the development of decentralized apps. Solana’s blockchain was faster, more scalable, and had lower transaction costs than Ethereum. It achieved this by using its unique Proof of History (PoH) mechanism to accelerate proof of stake (PoS) mining method used by Ethereum.
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However, a series of network congestion and security flaws caused Solana to lose its luster, and rising fees subsequently crushed the cryptocurrency market. To make matters worse, failed cryptocurrency exchange FTX hastily liquidated its Solana tokens in several large auctions to raise more money to pay its creditors. As a result, Solana’s price fell below $10 by the end of 2022.
Even so, Solana recovered, reaching $163; Your original investment of $10,000 would still be worth $1.72 million. It was difficult for investors to hold Solana during these wild swings, but it is now the world’s fifth-largest cryptocurrency with a market cap of $71 billion. Could it continue to grow and turn a new $10,000 investment into $1 million again?
What’s next for Solana?
Solana’s powerful rally suggests it will remain a formidable rival to Ethereum as a platform for developing decentralized applications and tokens. Its network has already been used to produce a wide range of meme coins, including notable ones like BONADO (BONADO -3.13%) and WIF (WIF -1.08%), as well as decentralized exchanges like Jupiter and Orca. Expanding this ecosystem could make it a fertile environment for more crypto projects.
New decentralized wallets and financial applications could also help Solana (and Ethereum) disrupt traditional financial institutions. The introduction of Solana Pay, which has been integrated into Shopify Last year marked a big step in that direction. Visa has also started running its stablecoin settlement program on Solana, while Circle recently added native Solana support for its EURC stablecoin.
Solana Labs subsidiary Solana Mobile even launched its own Saga smartphone last December. The Android device is still a niche gadget, but it targets Web3 enthusiasts with its integrated digital asset management and Solana blockchain tools.
Solana’s rapid expansion is impressive, but Ethereum is struggling to match Solana’s speed and scalability with its own network upgrades. In a recent essay, Ethereum co-founder and chief architect Vitalik Buterin proposed introducing “multidimensional gas fees” which sounds similar to Solana’s variable project-by-project user fees in its “local fee markets.” If Ethereum fills this gap, it could limit the long-term growth of Solana’s blockchain ecosystem.
How much higher can Solana go?
Solana appears to have overcome its initial growing pains. Solved congestion issues caused by feverish market interest in non-fungible tokens (NFTs) in 2021, it survived the massive FTX liquidations and still processes transactions faster than Ethereum. Developers are still launching new apps on Solana and promoting their new tokens with airdrops.
However, it is difficult to say how much the Solana blockchain can grow as it is overshadowed by the larger Ethereum network. For now, CoinPedia estimates that Solana’s price could reach $500 by the end of the year and $1,672 by 2030.
You should take these estimates with a grain of salt, but they imply that Solana will continue to be one of the world’s top cryptocurrencies as it attracts more developers and becomes more widely adopted for mainstream payments. But even if Solana’s price reaches $1,672 by 2030, that would only turn a new investment of $10,000 into about $100,000.
Therefore, Solana may still have great upside potential – but it probably won’t make you a millionaire by the end of the decade. It could also easily be cut in half before generating larger gains, so investors should prepare for a lot of volatility.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Ethereum, Shopify, Solana, and Visa. The Motley Fool has a disclosure policy.