Why Solana Jumped 10,000% in 2021?

Not many retail and institutional investors heard about Solana (SOL) before 2021. The cryptocurrency hardly saw any substantial gains during the second half of 2020. However, Solana’s popularity skyrocketed in 2021 as the digital asset saw immense demand from retail and institutional investors.

The latest data posted by Coinmarketcap shows that Solana gained nearly 10,500% in 2021, which makes it the best performing digital currency among the top 10. SOL started this year at a price level of just $1.5 and touched an all-time high of approximately $210 on 9 September 2021. Solana’s trading volume and the overall network activity have increased substantially in the last few months.

The most surprising part of the latest rally in Solana is the interest of institutional investors in the world’s 7th largest cryptocurrency. Last week, SOL investment products attracted $50 million worth of institutional inflows, which is more than the combined weekly inflows of Bitcoin, Ethereum, Cardano, Polkadot and XRP investment products.

So, what is the main reason behind Solana’s enormous rally in 2021? Crypto analysts believe that the technology behind Solana is better than most of its competitors and that is why Solana’s adoption has increased significantly in the last few months. Secondly, the fear of missing out (FOMO) is playing a major role in the recent surge in SOL’s demand.

Solana’s Technical Advantages

Maria Stankevich, Chief Business Development Officer at EXMO UK, believes that Solana’s high speed and low cost of the transaction are playing an important role in its global adoption. “To be honest, before the Solana project, we heard many times about so-called ‘Ethereum killers’. Cardano, Polkadot: they all tried to solve challenges ETH faced. ETH is still the absolute champion in the Defi world. However, the Ethereum network is trying to solve massive problems of the network overload which makes it impossible to scale the network to millions of the users since the commissions are rocketing to the roof,” Stankevich said.

“Solana claims that its blockchain can support more than 50 000 transactions per sec (TPS) which makes it the fastest blockchain ever. In comparison, it’s 3000 times faster than ETH (15 TPS). Also, the average time of the block is 400-800 msec, and the average commission for a transaction is 0.000005 SOL (less than a cent!). Another secret of Solana is a new protocol Proof-of-History, that allows the unprecedented traffic possibility,” she added.

“So, the main advantages that influenced the price surge are: the high speed and low cost of the transactions, a more eco-friendly blockchain, the possibility of scalability (without the sharding and 2 level solutions), numerous partner relations inside of the network, a focus on the dapps in the Defi system, the experienced team, listing on many exchanges, the possibility to earn with staking, and security,” Stankevich explained.

FOMO

Finance Magnates also asked Johnny McCamley, Founder of CryptoClear, about his views on the latest price movement of SOL and the key advantages of the Solana blockchain. McCamley mentioned that the strong fundamentals of Solana blockchain and FOMO among retail and institutional investors are driving its price rally.

“Solana is an excellent investment for the long term- 1 of the 15 projects that we, at CryptoClear, include in our Dollar Cost Averaging plan (DCA Plan) for the long term due to the team, tech maturity and real-life use case. Solana ensures composability between ecosystem projects by maintaining a single international state as the network scales. Never deal with fragmented Layer 2 systems or sharded chains. Low cost, forever-Solana’s scalability ensures transactions remain less than $0.01 for both developers and users. Fast, forever-Solana is all about speed, with 400 millisecond block times. And as hardware gets faster, so does the network,” McCamley mentioned.

“One of the major reasons behind its recent price surge is FOMO (Fear of Missing Out). Those who do not own SOL and other crypto assets will have the fear that they have ‘missed the boat’ and start investing as soon as they can,” he added.