Credit: A pile of cryptocurrencies — Nuthawut / stock.adobe.com
As holders of Solana (CRYPTO: SOL) know perfectly well, there's always a way to mint a new millionaire -- or a pauper -- in cryptocurrency. Get-rich-quick schemes usually don't get anyone rich except for the one selling the scheme.
And on the Solana chain, as well as a few others, there's a very easy way to be out of your money even faster than if you were to light physical dollar bills on fire. So, here's what you need to absolutely not do with your Solana investment unless you're desperate to lose your money.
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Avoid this entire category of risky investment
Being one of the first investors to have access to an opportunity is a lucrative edge, especially in spheres like venture capital (VC). By investing before the public has a chance to get in, it's possible to take larger positions on the cheap and then, in the case of companies destined for trading on the stock market, liquidate those positions for big bucks when the business makes its initial public offering (IPO).
In the traditional business sector, such investing activities are highly regulated by the Securities and Exchange Commission (SEC). Every company that does an IPO is required to file paperwork with the agency and submit to regulatory scrutiny and then routine oversight after going public. In other words, if a company was planning to simply defraud its early investors in some way in the course of the IPO, there are legal protections that attempt to prevent that outcome or levy penalties in the aftermath.
There aren't any such protections for investors in the many projects being created on the Solana blockchain. Therefore, if you decide to participate in a "presale" known as an initial coin offering (ICO), the odds of getting scammed are high. Those who bought in before the ICO will want to exit, but if you buy from them, there may not be anyone else willing to buy your coins from you unless it's at a dramatically lower price.
Consider the kind of projects that might opt to do an ICO or presale. Some, like those purporting to be raising funds for blockchain-based artificial intelligence (AI) infrastructure, are simply capitalizing on a wave of hype in the cryptocurrency community, and they may not be actively looking to defraud their investors. They could still be absolutely abysmal investments -- and most are. You gain nothing by getting in on the ground floor aside from the sensation of being early to a dumpster fire.
However, the larger portion of presales conducted on Solana are for much more frivolous projects, specifically meme coins. Think about the process. To raise money for a meme project, the presale token sellers need to hype their coin before it even launches, at which point they require an ongoing inflow of attention to send prices higher so they can exit their positions. Or, in the much more likely scenario, buyers of the presale tokens will be left holding worthless coins that never achieve viability.
Don't allocate your scarce capital to ICOs or presales. Your money will evaporate even faster than with other investing mistakes you might make with Solana.
There's no need to go out on a limb when there's a better option
The saddest part about investors losing their hard-earned Solana to presale and ICO grifts and scams is that they're already holding a vastly superior investment. Solana itself is far from a sleepy coin with minimal volume and a nascent development team. Its market cap is more than $90 billion, and as of Feb. 6, its 24-hour volume was $3.8 billion.
It has ample catalysts in store this year to send its price soaring even higher than it already has. What's more, those catalysts -- governmental adoption of the coin, celebrity meme coin activity, and the potential launch of exchange-traded funds (ETFs), among others -- have the chance to buoy the entire chain for years to come.
So be patient with your funds. Holding onto Solana for the next few years is guaranteed to offer a better return than gambling your Solana on ICOs and presales.
Don’t miss this second chance at a potentially lucrative opportunity
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*Stock Advisor returns as of February 3, 2025
Alex Carchidi has positions in Solana. The Motley Fool has positions in and recommends Solana. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
