Up 15% in 3 Months, Is Solana a Buy Right Now With $1,000?

Key Points

• Solana's price has been trending upward recently.

• It's gaining ground against Ethereum, continuing the prior trend.

• It'll need to keep building up its case for institutional adoption to proceed.

• 10 stocks we like better than Solana ›

Solana's (CRYPTO: SOL) price has climbed by around 15% since late April, moving from about $146 to roughly $167 as I write this.

The move is hardly breathtaking. Still, it prompts a pair of bigger questions. Namely, does an extra $1,000 of your portfolio belong allocated to this coin before the next leg up? And does it have what it takes to continue gaining in value for at least the next few years? Let's address both of these questions at once.

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This is a platform that's hitting its stride and fitting the market

The story of Solana is one of an increasingly tight fit between its product, -- another way of saying its blockchain -- and what the market is looking for in terms of chain features.

Solana's calling cards are its speed and cheapness.

Over the last week, it averaged 2.2 million daily active wallet addresses and about 98 million daily transactions, all of which it accomplished while keeping transaction fees near fractions of a cent and its average transaction times within a second or two. Those figures tower over every major rival, especially incumbents like Ethereum, and the disparity explains why developers who are making consumer-scale decentralized apps (dApps) keep flocking to the chain.

The upshot of these stellar performance features is that big money in the traditional financial sector is noticing. Faster settlement times and lower collateral demands are the bait for institutions, and fee savings are the hook.

In late May, digital assets company R3 struck a deal with the Solana Foundation so its partnered financial institutions, most of which are big banks, can issue and trade tokenized stocks and bonds on the chain. The partnership vaults Solana into pole position for a slice of an asset tokenization market that could be worth as much as $16 trillion by 2030, according to estimates developed by Boston Consulting Group (BCG).

Speed also resonates with two of crypto's newest darlings, the artificial intelligence (AI) segment, and decentralized physical infrastructure networks (DePIN).

In July, the Neural AI gaming platform picked Solana for its creator-focused launchpad, citing sub-second confirmations as critical for real-time game logic. Other AI projects are flocking to the chain under the rationale that AI agents will be cheaper to operate when they don't need to hold as much of the chain's native token in their wallet to perform transactions compared to elsewhere.

On the DePIN front, Solana-based wireless, compute, and mapping protocols have generated more than $3 million in on-chain revenue this year after setting a monthly record in June. Faster transaction times matter for accessing physical infrastructure apps because, for example, it'd be very frustrating if you had to wait for more than a moment or two to pay for access to a cafe's wifi network using a cryptocurrency.

None of this traction is accidental. High throughput attracts developers, they ship apps that attract users, users attract capital seeking a return on investment in on-chain projects, and then swelling usage of the chain justifies even more ambitious upgrades to its throughput to keep the cycle going.

You could still lose some of your $1,000

If your portfolio is big enough, taking on $1,000 of Solana isn't going to make or break it, but it's still important to appreciate the risks of an investment before diving in.

In the past, most recently in February 2024, Solana has suffered headline-grabbing outages of its network. Those have been anomalies, and there is no indication that they will occur again, yet on a long enough timescale, they could. If the chain displays instability too frequently, which, once again, does not look probable even though it's possible, institutional investors could get spooked and look for other solutions.

Separately, regulatory risk looms if U.S. government agencies shift their views on public-chain settlement of transactions, or their views on how tokenized assets must be handled. Solana's compliance feature set is far from vestigial, but it hasn't yet had a real stress test either. There will likely need to be more tech development within that space, which implies a risk of getting it wrong.

Competition is also fierce. Ethereum's layer-2 (L2) roll-ups are cheaper every quarter, and emerging layer-1s (L1s) chase the same AI and DePIN segments as Solana, even if they're starting from a vastly smaller capital base. It isn't likely that any of those competitors will supplant Solana entirely, but at least somewhat hampering the growth of its market share in their focus segments is all but assured.

Still, if Solana secures a meaningful share of asset tokenization, maintains its AI and DePIN leadership, and avoids catastrophic technical stumbles, today's price could look tiny in five years. For most investors, this argues in favor of a dollar-cost averaging strategy rather than a single lump-sum plunge. In other words, treat SOL like a high-volatility growth stock that's highly unpredictable from day-to-day, yet rewarding over the years if the thesis holds.

Should you invest $1,000 in Solana right now?

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Alex Carchidi has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.