Solana in 2 figures: Is it a buy?

Solana (CRYPTO: SOL) has been one of the surprising crypto success stories of 2023. After a disastrous 2022 that saw it lose 94% of its value, Solana is delivering triple-digit returns for investors this year. Solana is now trading at $22.35, more than double its value at the end of 2022.

While the Solana’s performance has been impressive, it’s time to look under the hood to see if this performance is sustainable in the long run. If you’re considering buying Solana right now, there are two key numbers to consider.

Solana vs. Bitcoin

For the year, Solana is up 127%. This performance is better than any other cryptocurrency currently ranked in the top 25 by market capitalization. In comparison, Ethereum (CRYPTO: ETH) is up “only” 59% and Bitcoin “only” 76%. On the TradingView chart below, it is possible to see how significantly Solana has outperformed Bitcoin this year.

That is why I am concerned that Solana’s performance in 2023 may be unsustainable. Does anyone really think Solana is a significantly better investment than Bitcoin right now? My hypothesis is that Solana’s price simply goes back to the levels before FTX the crisis hit.

Back in November 2022, investors were hugely concerned that Solana would fall victim to FTX contamination due to his close relationship with former FTX CEO Sam Bankman-Fried. As a result, Solana’s price fell below $10 for the first time in almost two years at the very end of 2022. Thus, what looks like a huge market transition this year may actually just be Solana going back to where it was six months ago. Earlier.

NFT sales volume

To examine this hypothesis in more detail, I checked out the latest non-fungible token (NFT) sales volume data from CryptoSlam. After all, NFTs are the lifeblood of Solana’s blockchain ecosystem, and a key selling point for Solana has always been the NFT growth story.

Image source: Getty Images.

The encouraging news is that Solana still ranks as the #2 blockchain when it comes to NFT sales volume, second only to Ethereum. But it’s not even close. In the last 30 days, the total NFT sales on Ethereum have been more than 5 times that of Solana. So Solana doesn’t come any closer to Ethereum as an NFT leader.

At the same time, a number of Ethereum Layer 2 blockchains — such as e.g Polygon — growing very quickly. Over the last 30 days, Polygon’s NFT sales volume is up 35%, while Solana’s sales volume is mostly flat (down 0.37%).

Also, if you dig a little deeper, it becomes increasingly difficult to find any Solana NFT collections that rank in the top 20 by sales volume. While Ethereum has branded collections, such as Bored Ape Yacht Club and CryptoPunks, the best Solana NFT collection right now is Mad Lads, which first launched in April. Two of the best-selling NFT collections for Solana abandoned ship last year in the wake of the FTX meltdown, and Solana has struggled to find a new flagship NFT collection ever since. The hope now is that the Mad Lads (currently ranked No. 6) can play that role.

Buy, hold or sell?

Based on the numbers above, the case for buying Solana is more complex and nuanced than it might initially appear. From my perspective, Solana’s price has overcorrected to the upside this year after overcorrecting to the downside last year. Solana’s price seems very volatile right now, and I am particularly concerned that Solana has overheated to such an extent that it is significantly outperforming Bitcoin.

If Solana’s NFT sales numbers were a little more encouraging, I’d be OK with that. But for now, Solana is a hold – not a buy. Solana is worth holding on to see if it can recapture some of its mojo from the previous crypto bull market rally. But I can’t recommend it as a buy until Solana’s NFT numbers show better performance.