In the world of crypto investments, Bitcoin ( BTC -2.06%) and Ethereum ( ETH -1.85%) usually dominate the news. This is understandable, as both have climbed around 30% this year and are considered essential holdings in any diversified crypto portfolio.
However, if your current crypto budget is just $500, there may be a more attractive choice: Solana ( SOL -6.02%). As the sixth-largest cryptocurrency globally, Solana has surged roughly 40% over the last three months and is drawing significant interest thanks to the potential launch of spot crypto exchange-traded funds (ETFs). Here’s why Solana could be the next asset to add to your crypto holdings.
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Is Solana positioned to succeed Ethereum?
Shortly after its debut in March 2020, Solana quickly attracted attention as a possible rival to Ethereum. Like Ethereum, Solana operates as a smart contract blockchain with a broad and diverse ecosystem.
Yet, Solana stands out for its remarkable speed and low transaction costs. Its network can now handle over 100,000 transactions per second, while Ethereum’s main chain manages only about 30 per second.
The most compelling aspect is that this high throughput is now translating into substantial revenue for those building on the Solana blockchain.
Investment firm 21Shares reports that Solana generated over $2.85 billion in revenue over the past year. This income was driven by activities such as decentralized finance (DeFi), crypto trading, meme coins, decentralized physical infrastructure (DePIN), and artificial intelligence (AI). These figures are comparable to the annual revenues of companies like Palantir Technologies ( PLTR -5.39%) and Robinhood Markets ( HOOD -8.77%).
The emergence of Solana treasury firms
Previously, digital asset treasury companies focused solely on Bitcoin. These organizations raise capital from investors and allocate it directly into a single cryptocurrency. Strategy ( MSTR -4.84%) led the way, amassing $78 billion in Bitcoin holdings.
Recently, several publicly traded Solana treasury companies have entered the scene. In total, 18 companies now collectively hold over $4 billion worth of Solana, which accounts for about 3% of the cryptocurrency’s circulating supply.
This new wave of demand could push Solana’s price even higher, just as similar treasury companies have done for Bitcoin and Ethereum. Some of these Solana-focused firms have already secured multi-billion-dollar investments, meaning there is significant capital ready to flow into Solana.
The upcoming Solana ETFs
Perhaps the most exciting development is the anticipated rollout of Solana ETFs. These spot ETFs will function similarly to those for Bitcoin and Ethereum, holding only Solana and allowing investors to gain exposure to its spot price through a familiar investment vehicle.
Although institutional interest in Solana does not yet match that of Bitcoin or Ethereum, it remains noteworthy. CoinShares’ latest fund flow data shows that over $1.5 billion has already been invested in Solana through various products this year. Earlier in the year, JPMorgan Chase ( JPM -1.52%) estimated that Solana ETFs could attract as much as $6 billion once they begin trading, representing another significant source of demand.
How to invest $500
With Solana currently priced around $220 (as of Oct. 9), a $500 investment would allow you to purchase two Solana tokens, with some funds remaining. You could use the leftover amount to buy shares of the new Solana ETFs when they become available.
While Solana’s year-to-date gain is just 13%, it experienced a meteoric rise of over 900% in 2023. If you’re seeking a fast-growing cryptocurrency with the potential for substantial returns, Solana is a strong contender.
