Solana (SOL -1.85%) is one of just a handful of large-market-cap cryptos that have outperformed Bitcoin this year. Solana is up 95% for the year, compared to 60% for Bitcoin. However, much of Solana's head-spinning performance came in the early part of the year. Since July 15, when it hit an intra-year high of $32, Solana is actually down 40%, as investors have increasingly soured on the crypto's future prospects.
So which way forward will it be for Solana? Will it continue its downward trajectory of the past 60 days, or will it find a way to soar even higher? There are two major factors to consider.
Let's start with the big partnership agreement that investors have been talking about ever since they returned from summer vacation. On Sept. 5, Visa (V -0.35%) inked a partnership deal with Solana, in which the credit card giant will use the Solana blockchain for processing transactions involving USD Coin, the second-largest stablecoin in the world. This stablecoin is pegged 1:1 to the U.S. dollar, making it possible for customers to pay with crypto instead of fiat currency at merchants that accept USD Coin.
There are several good reasons why Visa picked Solana. For one, the transaction processing speeds of Solana are elite. Visa needs a payment network that can process transactions as fast as it can, and Solana fits the bill. The theoretical transaction processing speed of Solana is 65,000 transactions per second, which is far superior to Visa's transaction processing rate of 24,000 transactions per second.
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Secondly, Solana has a solid track record of enabling crypto transactions that involve stablecoins. In February 2022, the crypto launched Solana Pay, which is a payment protocol for merchants willing to accept USD Coin as a form of payment. And last month, Solana partnered with Shopify on a Solana Pay integration for e-commerce sellers.
The big picture here is that Solana continues to build out real-world applications for its leading-edge blockchain technology. At the beginning of the year, Solana laid out its vision for the future, and it involves bringing super-fast blockchain technology to every niche of the real world, including the financial services sector. The goal, says Solana, is to match the same kind of throughput speeds as the New York Stock Exchange or other ultra-fast centralized computer networks.
Moreover, Solana is also moving ahead with its mobile crypto strategy. Solana first outlined this strategy in summer 2022, when it announced plans for a "crypto phone" powered by Android and built specifically for the Solana blockchain. It also made available tools and resources for mobile, so that developers could start building out apps for the Solana mobile ecosystem. Solana had a launch event for the mobile phone (known as the Saga) in April of this year, and it has been available for public sale since May 8.
The idea behind the Saga is simple but powerful: The future of crypto is mobile, and therefore all mobile devices should be optimized for crypto. People should be able to take their crypto with them wherever they go, and be able to use it easily in the real world. For example, right now it can be difficult to use a blockchain wallet on your mobile phone. Solana solved that problem with an innovation known as the Seed Vault, which securely holds the cryptographic keys required to access your blockchain wallet right on your mobile device.
In terms of future growth prospects, this is exactly what I'm looking for as a long-term investor: a big idea that can catalyze rapid growth. The big caveat here, though, is that the "crypto phone" concept may not appeal to the average smartphone user, especially given its original retail price of $999. That's about the same price you'd expect to pay for an Apple iPhone, and probably held back early demand. As a result, Solana is now offering the phone for $599.
Solana is trading for less than $20, which is approximately 50% below where it was trading at before the FTX crisis hit last year. So there is definitely some room to run. Even if Solana only makes it back to where it was trading just two months ago, it can still potentially deliver a huge return on investment.
Yes, the past year has been challenging for Solana, and there are some analysts who still think the price of Solana could crater all the way to $10, but I think these concerns are overblown. Solana is a crypto built for the long haul, and one that has very creative ideas about where the blockchain and crypto world is headed. As a result, I remain long-term bullish on Solana.
Dominic Basulto has positions in Bitcoin and USD Coin. The Motley Fool has positions in and recommends Bitcoin, Shopify, Solana, and Visa. The Motley Fool has a disclosure policy.