Considering a Switch from Bitcoin to Solana?
The S&P 500 (1.09% increase in 2024) has brought about a total return of 25% this year. Impressive, but not as mind-blowing as the crypto market. According to CoinMarketCap, the combined market value of all cryptocurrencies surpassed $3.30 trillion by December 19, 2023. That's a doubling in less than 12 months, from a starting point of $1.65 trillion at the end of 2023.
Crypto pioneer, Bitcoin (0.67% increase), saw a 138% rise over the same period. On the other hand, smart contracts innovator, Solana (-2.98% decrease), showed a 101% increase, almost leading the overall crypto market.
Looking at the bigger picture, starting from the lows of December 2022, Solana stands out with an impressive 2,000% price surge. This surpasses Bitcoin's growth, even with Bitcoin's own fantastic return during the same period. It would be quite astonishing if Solana could continue this trend in 2025 and beyond.
Should you consider adjusting your crypto portfolio now, selling some Bitcoin to invest in more Solana?
Solana's remarkable comeback: A reaction to FTX collapse
Let me point out that Solana's recent upsurge began from a very low point. Following the financial turmoil of Sam Bankman-Fried's FTX crypto exchange, Solana plummeted from $259 to $10 per token in about a year. Recovering from such a massive fall is challenging, but easier than skyrocketing from a higher initial position. Bitcoin too suffered due to the FTX crisis, but its price drop was considerably smaller than Solana's. Essentially, Solana's exceptional gains in 2022 summer were aided by an unnaturally low base price.
Solana's real-world applications
On a positive note, Solana is well-positioned to thrive. The cryptocurrency has proven itself as a leader in executing smart contracts swiftly. This is particularly useful for automating financial transactions and other asset-based alterations. In fact, Solana's high-speed contracts are an asset when managing a large volume of decentralized programs simultaneously under pressure. Mobile games, blockchain-based trading platforms, and NFT sales are just a few industries that can benefit from Solana's features.
As a result, Solana's return to the top 10 popular cryptocurrencies makes sense. Incorporating some Solana into your portfolio in 2024 seems like a good idea as the token is poised to become a common option in real-world applications over the next couple of years.
Bitcoin's growth factors
However, can Solana consistently outperform Bitcoin at this stage? It's possible, but I'm not entirely convinced. Bitcoin has many growth catalysts working in its favor:
- Bitcoin recently implemented its fourth economic update, halving the number of coins issued with each new block of Bitcoin transaction data. Historically, these halvings have led to remarkable price increases about a year later. There's no reason to believe this trend won't continue.
- ETFs based on real-time Bitcoin prices are about a year old. Their introduction promised to attract significant new capital into the crypto market, using accustomed stock investment tools. About 5.2% of all Bitcoins have been absorbed by these ETFs so far, with the iShares Bitcoin Trust (0.16% increase) leading the charge. The influx of capital picked up pace in November, although this week's disappointing economic reports resulted in the largest single-day outflow yet. Even Bitcoin and its ETFs remain volatile.
- The positive sentiment towards Bitcoin was fueled by November's election results. The incoming administration displays a more crypto-friendly stance, and the president-elect advocated for cryptocurrency support in his campaign. This change in leadership could potentially lead to the creation of a national Bitcoin reserve, making the cryptocurrency even scarcer and driving up its price.
There are numerous other promising trends and technical data supporting Bitcoin's growth. Bitcoin isn't standing still; Solana will need to work hard to keep up with this powerhouse in the long run.
I prefer to hold more Bitcoin than Solana
It may seem contradictory considering the extreme price swings and continuous volatility of Bitcoin, but the digital gold has evolved into a reliable value-holding asset. There are no "safe bets" in the crypto market, but Bitcoin approaches being one. A sudden turn of events could transform Solana into a fleeting crypto market footnote, but it would take a drastic shift to dethrone Bitcoin.
As a long-term investor, I prefer to maintain a significant Bitcoin holding and a smaller, speculative investment in Solana. To clarify, I own both. However, Bitcoin's future price movements will have a far greater impact on my savings compared to Solana's potential gains.
And that's how I like it. Your experiences may vary, but Bitcoin appears to be the stronger investment idea to me.
Considering Solana's remarkable recovery and potential for real-world applications, it might be worth exploring options for investing some funds in this cryptocurrency. However, Bitcoin's proven track record, growth factors, and reputation as a reliable value-holding asset make it a strong choice for long-term finances, especially for those prioritizing stability over high returns with potential volatility. Investing in both could be a smart strategy, balancing risk and potential rewards in your finance and investing portfolio.
