Last year, investors bet on Solana (CRYPTO: SOL) as one of the top cryptocurrency players of the future. As a result, it soared 16,000% from the start of the year to its November peak of $250. It's since dropped more than 60% from that point.
What happened? Rising inflation drove investors away from investments considered risky -- such as cryptocurrency. The conflict in Ukraine added to concerns. In this context, you might wonder if Solana's gains are over -- or if this young crypto player once again may be a multibagger.
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More than 5,100 projects
Let's look at why investors piled into Solana in the first place. Like many of its rivals, this crypto is a blockchain with its own token called "sol."
Solana has quickly climbed the ranks when it comes to decentralized applications (dApps) and non-fungible tokens (NFTs). In just a year, projects on the network grew from 70 to more than 5,100. And Solana has become the second-biggest blockchain by NFT sales volume over the past 30 days, according to CryptoSlam.
Celebrities also are getting in on Solana. Last year, basketball legend Michael Jordan announced his plan for a Solana-based platform to connect sports stars and fans. The platform recently launched its first NFT collection.
Growth is far from over at Solana. The blockchain recently announced a new feature that may be significant. I'm talking about Solana Pay, which is a digital-payment platform for merchants and their customers.
This isn't just about paying with sol tokens. The idea is users can pay with any currency -- including U.S. dollars. Transactions reach completion immediately, and costs are a fraction of a cent.
Why do users like Solana?
What do users like so much about Solana? High transaction speed and low cost. The blockchain right now is processing more than 2,400 transactions per second. And as with transactions on Solana Pay, the average cost is less than $0.01.
Solana wins on speed because of its method of verifying transactions. The blockchain introduced a method called proof of history. In proof of history, timestamps are added to blocks of data. And this streamlines the verification process.
Considering this, could Solana be a multibagger? The cryptocurrency market remains risky. It's impossible to guarantee the success or failure of one particular player right now. But it's fair to say Solana has many elements that could make it one of tomorrow's winners.
There's also plenty of room for an increase in value. If Solana tripled from today's price, its market value would total about $80 billion. That would make it the third- or fourth-biggest cryptocurrency by market capitalization.
If Solana continues on its current path, we could imagine it taking this spot among the very biggest players. And that means, from today's level, Solana may deliver multibagger returns. yet again.
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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