SSince peaking in November, the crypto market has plunged nearly 70% and lost over $2 trillion in value. This sharp drop can be explained by an increasingly worrying economic environment. With inflation soaring, some economists believe a recession is imminent, so investors are pulling money out of risky assets.
However, crypto investors have seen this kind of crash before. In fact, the market lost 88% of its value during the last crypto winter, a three-year downturn that began in 2018. Of course, past performance is never a guarantee of future returns, but the thesis of investment for Solana (CRYPTO: SOIL) and Bitcoin (CRYPTO: BTC) remains intact.
Here’s why both cryptocurrencies are worth buying now.
Solana is a smart contract platform designed to support fast and scalable decentralized applications (dApps) and decentralized finance (Challenge). Its main innovation is a unique consensus mechanism that combines proof of stake and proof of history to timestamp incoming transactions. This creates a verifiable order of events, which speeds up throughput and keeps fees low.
In fact, Solana can theoretically handle 50,000 transactions per second (TPS), and each transaction costs a fraction of a penny. By comparing, Ethereum handles less than 15 GST, and the average fee currently sits at $6.50. This discrepancy has developers rushing to Solana.
Last year, with the exception of Phantom, Solana has seen its community of developers grow faster than any other blockchain project, according to data from Electric Capital. Even better, Solana ranked as the fourth most popular blockchain in terms of total number of developers, and this advantage has led to the rapid growth of its ecosystem of dApps and DeFi services.
For example, over the past 30 days, Solana-based Magic Eden has ranked as the second most popular NFT market in the crypto industry (behind Ethereum-based OpenSea) in terms of volume and of users. More broadly, Solana is the fourth largest DeFi platform, with $2.7 billion invested in products on the blockchain. DeFi is particularly noteworthy because it promises to make financial services more efficient by eliminating intermediaries such as banks.
Assuming Solana-based dApps and DeFi services continue to gain traction with users, demand for the underlying SOL coin should increase, making it more valuable over time. And with Solana trading 88% below its peak, now seems like a good time to buy.
In many ways, Bitcoin is at the heart of the crypto industry. Its blockchain does not offer the same programmability as Solana, and its proof of work consensus protocol has drawn criticism for its power-hungry nature and substantial carbon footprint. Even so, Bitcoin was the first modern cryptocurrency, and it remains the most popular and valuable. In fact, around 75% of US crypto investors own Bitcoin, according to eMarketer. The next closest rival is Ethereum at 39%. Perhaps more impressively, Bitcoin currently accounts for around 45% of the total crypto market value.
A constellation of factors is driving these trends. First, Bitcoin has been adopted by many fintech platforms, including digital wallets like To blockCash App, PayPal, and Venmo – and that made it more accessible. Additionally, Bitcoin’s source code limits its supply to 21 million coins, and its finite nature has earned it a reputation as digital gold. Finally, public enterprises such as You’re here and MicroStrategy have put Bitcoin on their balance sheets, and more and more institutional investors are adding Bitcoin to their portfolios. In fact, Bitcoin ranks as the most widely held digital asset among institutions, according to a survey released by Fidelity in September 2021.
If these trends remain in place, the price of Bitcoin should rise as more public companies, retail traders, and institutional investors diversify into digital assets. For what it’s worth, asset manager Ark Invest estimates that Bitcoin’s value could reach $1.36 million per coin by 2030, implying a return 61 times higher than its current price of around $22,000. With this type of advantage on the table, I think it is worth buying this cryptocurrency.
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Trevor Jennewin has positions in Block, Inc., PayPal Holdings and Tesla. The Motley Fool holds and recommends Bitcoin, Block, Inc., Ethereum, PayPal Holdings, Solana, and Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.