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Currently, Solana (SOL) is the fifth largest cryptocurrency, with a market capitalization of approximately $71 billion. Following the recent decision by the US Federal Reserve to cut interest rates by 0.50% on September 18, the cryptocurrency market has seen a resurgence in investor confidence, leading to notable price increases for SOL.
In light of these developments, asset manager VanEck, through its MarketVector research department, has made convincing predictions about the future of Solana. The report highlights Solana’s technological advancements and raises questions about the current market positioning vis-à-vis Ethereum (ETH).
Solana’s market cap could reach $157 billion
VanEck’s analysis reveals significant differences between Solana and Ethereum, especially in terms of performance metrics. Solana processes 3,000% more transactions than Ethereum, has 1,300% more daily active users and offers transaction fees that are almost 5 million percent lower.
However, despite Solana’s superior performance, it is true market capitalization is only 22% of that of Ethereum, which currently stands at $314 billion. This disparity is even more apparent when we look at the combined activity of Ethereum and its Layer 2 (L2) solutions, which often increase transactional capabilities.
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Based on the report, optimism is growing that Solana could reach 50% of Ethereum’s market cap, which would mark a jump from the current market cap of $71 billion to $157 billion for the fifth-largest cryptocurrency.
Furthermore, the study notes that the SOL Award could reach a mark of $330, marking an increase of almost 120% for the cryptocurrency. This could represent a potential top for this market cycle and a new all-time high for the token, far from the current all-time high of $259 in the 2021 bull run.
VanEck warns against missing SOL opportunities
The report also notes that the role of decentralized finance (DeFi), stablecoins and payments are crucial drivers for the adoption of both Ethereum and Solana. Lending and borrowing in the DeFi space is expected to grow rapidly. At the same time, Solana’s cheaper rates and faster transaction times make a strong argument for its adoption in payments and remittances.
The asset manager believes that if institutions and regular users can benefit from low-cost transactions, Solana’s user base could grow significantly, further strengthening its ecosystem and usage.
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However, the report states that this is the case private investors are beginning to recognize the benefits of Solana, but institutional adoption has been slower. Contributing factors include Ethereum’s first mover advantage, greater institutional prominence, and a general reluctance to shift significant capital from established assets like ETH.
Still, VanEck points out that institutions that “overlook undervalued assets,” like Solana, risk missing out on significant opportunities. The company concludes that holding on to established assets without considering emerging competitors can be dangerous in cryptocurrency.
At the time of writing, SOL was trading at $152, up 3.3% and almost 20% over the 24-hour and seven-day periods respectively.
Featured image of DALL-E, chart from TradingView.com
