Why Solana Will Outperform Bitcoin (Once more) in 2022


Bitcoin (CRYPTO:BTC) has taken up most of the conversation in cryptocurrency for greater than a decade, and it is the largest cryptocurrency by market cap right this moment by a large margin. However smaller cash like Solana (CRYPTO:SOL) are beginning to eat into that lead, and Solana’s 10,970% achieve in 2021 far exceeded Bitcoin’s 57.6% rise.

Nonetheless, the competitors between Bitcoin and Solana is not precisely for a similar area within the crypto financial system. Bitcoin is more and more being regarded as digital gold or an inflation hedge. Solana is a cryptocurrency constructed for low-cost, high-speed transactions, making it extra of a utility coin. And these variations are why I believe Solana will outperform Bitcoin once more in 2022. 

Chart graphic of a rocket going to the moon.

Picture supply: Getty Pictures.

A shift is already taking place

We are able to get some clues into the place crypto merchants’ cash is flowing from Coinbase’s (NASDAQ:COIN) buying and selling quantity statistics. Bitcoin accounted for 32% of complete buying and selling quantity within the third quarter of 2020 however that fell to only 19% by Q3 2021. Ethereum (CRYPTO:ETH) gained 4 proportion factors of market share, transferring from 18% to 22%, however different cryptocurrencies jumped from 50% of buying and selling quantity to 59% over the past yr — amongst them, Solana.

An analogous story is forming with builders. It is laborious to outline developer exercise within the fast-moving crypto world, however it’s protected to say that Solana’s developer group is booming whereas Bitcoin’s is stagnant. In simply the final two months, Solana Ventures, the enterprise capital arm of Solana, has announced $250 million in venture capital funds to construct out video games. That is on prime of NFT marketplaces and finance initiatives, that are already hitting the market.  

This is one other indication of Solana’s progress. Phantom, which is a well-liked pockets on Solana that holds crypto, tokens, and NFTs, lately tweeted that it has grown to 1.8 million month-to-month energetic customers. 

By any measure, Solana is booming, and its positive factors are coming on the expense of previously common cryptocurrencies like Bitcoin. 

What if Bitcoin is digital gold?

One argument for Bitcoin is that it is digital gold — an asset that can all the time retain worth similar to bodily gold. But when that is the case, the upside for utility tokens ought to be a lot larger than gold-like tokens, if the analogy to the bodily world is any indication. 

  • The worldwide market capitalization of gold is about $11 trillion, based on a number of estimates. 
  • U.S. shares alone are value $49 trillion, based on Siblis Analysis, as of Sept. 30, 2021.
  • Europe’s publicly traded firms are value $8.1 trillion, based on Buying and selling Economics. 
  • World actual property is valued at $326.5 trillion, based on analysis agency Savills. 

These are estimates, however they present that buyers worth companies that present utility, progress, and earnings extra extremely than they worth gold in the true world. And this does not embody the worth of small companies. How ought to we translate this to the digital world? 

I believe the clear lesson is that utility and bodily land are extra worthwhile than gold. So, it will logically make sense that the utility of the crypto financial system could be value greater than crypto’s digital gold over the long run. 

Solana has plenty of upside

Evaluating Solana and Bitcoin market caps straight is not fairly truthful. Bitcoin’s worth is primarily to those that maintain it, whereas Solana is extra like a fiat forex, used as a medium of transaction for NFTs and different tokens. Nonetheless, their market capitalization is one of the best proxy we now have right this moment, and an inexpensive foundation for comparability of those two cryptocurrencies. 

Bitcoin has fallen from its $1 trillion-plus valuation, however has a market cap of $870 billion as I am writing, whereas Solana’s market cap is $50.8 billion. If you happen to imagine the argument above that cryptocurrency and the digital financial system might be about proudly owning utility and never simply digital gold over the long run, then Solana ought to be one of many largest winners. That is why I believe it can outperform Bitcoin in 2022 and past.

This text represents the opinion of the author, who might disagree with the “official” advice place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even considered one of our personal — helps us all assume critically about investing and make choices that assist us develop into smarter, happier, and richer.


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