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Solana Crypto Has Near-30% Upside Potential

InvestorPlace - Stock Market News, Stock Advice & Trading Tips Using TVL (total value locked) in crypto uses as a measure, Solana crypto could rise 28% over the next year...

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This story originally appeared on InvestorPlace

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

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Solana (CCC:SOL-USD) crypto is now the sixth largest cryptocurrency with a $60 billion market capitalization. This puts its rank just behind Cardano (CCC:ADA-USD) in the list of the largest cryptos, according to CoinMarketCap. This caps a few stellar months of performance where SOL crypto has skyrocketed. I believe its prospects are still quite bright.

Concept art of the Solana (SOL) blockchain.
Source: Shutterstock

In fact, just a few months ago, on July 31, SOL crypto was at $34.25 per token. Now as of late Oct. 29, it traded right below $200 at $199.52. That means in the space of three months it is now 5.825 times greater.

As a result, its market value has risen from $10.3 billion to $60 billion in one quarter, which is quite a feat. Although it’s not likely the crypto will keep this pace up, there is good reason to believe that it can continue to do quite well.

Where Things Stand With Solana

A number of developments have pushed Solana to this height. Probably the most important one is the Total Value Locked or TVL statistics for Solana, which have skyrocketed. TVL measures the total dollar value of smart contracts using Solana crypto.

TVL keeps track of “how much money is locked inside a specific protocol, in the form of liquidity pools, collateral held, or simple deposits,” according to Decrypt magazine.

Decrypt sites DeFeLlama statistics to measure Solana’s TVL, which now stands at $12.69 billion as of Oct. 29. This compares with Ethereum (CCC:ETH-USD) with its TVL at $165 billion. This is out of a total of $245 billion in total TVL as of Oct. 29.

That may seem inconsequential since it shows that Solana is only 7.7% of Ethereum’s. But this misses the point. Solana has climbed to this position as the No. 2 TVL digital asset within the last several months.

In fact, only Binance Coin (CCC:BNB-USD) has a large TVL as Solana other than Ethereum. Its TVL is at $19.62 billion. As Binance Coin has a market value of $89.8, or almost 50% higher than Solana, this corresponds with its 54% higher TVL (i.e., $19.6 billion / $12.7 billion).

The point is that the growth in the market value seems to correspond with the growth in TVL of a cryptocurrency. That bodes well for Solana crypto, as its TVL seems to still be growing quite significantly.

Where This Leaves Solana Now

At the end of July 31, according to DeFiLlama, the Solana TVL stood at $1.39 billion. It is now up 9.13 times to $12.69 billion 3 months later. However, the stock price has only risen 5.8 times, as I showed above.

This implies that Soalan could have significantly more upside. For example, if the market cap should rise to 9.13 times its July 31 market value, but it’s only up 5.825 times now, we can conclude it might have 57% more to go (i.e., 9.13/5.825 – 1).

Given that the market could either undershoot or overshoot this target, we can project that it might have a range of 40% to 60% more to rise. And that is just to catch up with the growth in its TVL. If Solana crypto has an even higher TVL the growth range in its market value could be even higher.

What Solana Crypto Is Worth

Here is another way to value Solana crypto. Ethereum’s TVL is at $165 billion, which is 67.35% of the total $245 in total value locked now. Since Ethereum has a market cap of $517.2 billion, this implies that at 100% of the TVL market share it would be $767.93 billion (i.e., $517.2 billion /0.6735). We can use this figure to estimate where Solana crypto might be going.

For example, if Solana could gain a 10% market in TVL, its market value would equate to 10% of $767.93 billion. That works out to $76.79 billion. But today its market value is at $60 billion and Solana crypto has a 5.18% TVL  market share.

Therefore, over the next year if Solana can gain a 10% market share (up from 5.18% now) its market value might rise to $76.79 billion. That means that a 93% gain in its TVL share will lead to a 28% gain in its market value (i.e., $76.79 billion /$60 billion -1).

What to Do With Solana Crypto

What I have shown is that Solana crypto’s market share in smart contracts, Defi (decentralized finance), and other applications like NFTs (non-fungible tokens) continues to grow, its market value will rise as well.

I estimate that over the next year Solana could easily rise another 28% or more if it reaches a 10% market share in total value locked. That is a pretty good return for most investors.

On the date of publication, Mark R. Hake held a long position in Ethereum but not in any other security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.

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