Solana: Buy the Dip? | The Motley Fool

Crypto investors are still trudging through the crypto winter, but over the long term, it can often pay to be greedy when others are fearful, making now a good time to take a look at some of the top cryptocurrencies.

Solana (SOL -1.27%), the ninth-largest cryptocurrency by market cap, is down 83% year to date, so fear is certainly in the air. Some reasons for optimism are quietly beginning to emerge, and the large decline year to date creates a potentially attractive entry point for risk-tolerant investors. Here’s why it could be time to buy Solana on the dip. 

Solana NFTs are heating up

The reasons for optimism start with non-fungible tokens (NFTs). While the overall NFT market has cooled, Solana NFTs are quietly gaining momentum. In fact, sales of Solana NFTs nearly doubled last month — data from DappRadar shows Solana NFT sales totaled $133 million for September, up from just $68.5 million in August. The spike appears to be driven by the launch of several high-profile NFT collections on Solana, including “y00ts” and “ABCD.”    

The Solana NFT ecosystem as a whole has built up a more significant presence in 2022. Magic Eden, which started as the primary NFT exchange for Solana and has since opened to Ethereum, became a unicorn by raising $130 million at a $1.6 billion valuation this summer. In the spring, OpenSea, the largest NFT platform, opened its platform to Solana NFTs. It had previously been the exclusive domain of Ethereum NFTs.    

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Making money with Solana

In addition to the uptick in the Solana NFT market, it is also becoming easier than ever to earn income on your Solana holdings. Solana is a proof-of-stake asset, so Solana users can earn rewards for helping to secure the network and for validating transactions. While Ethereum users need to lock up 32 ETH, or ether tokens, to run a validator node, Solana is appealing in that there is currently no minimum requirement for running your own Solana validator node. It takes a degree of technical know-how to run your own node and it comes with a list of hardware requirements, but the good news for Solana users is that there are plenty of popular third-party services that help users earn rewards in an easy and intuitive manner.

Coinbase Global allows users to earn 4% interest for staking their Solana on the platform. Coinbase customers automatically start earning interest on their Solana as soon as they buy it or transfer it into their account, in contrast to staking Ethereum, which users need to convert to Ethereum 2. Once a holder’s ETH2 is staked, it is locked up and can’t be traded. 

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Lido Finance is another popular option for earning rewards by staking Solana, and it pays 5.5% interest. The interest rate users can earn on Solana is comparable to the yields investors can earn on Treasury bonds or dividend stocks, which enhances the appeal of Solana to a wider base of potential investors.

Buy the dip on Solana?    

Solana may be through the worst of the downturn, with a 15% gain from the low reached June. However, it has also significantly lagged Ethereum in that time, as Ethereum is up 47% from the June lows, indicating that Solana could have more runway ahead. While I don’t think Solana will necessarily see the explosive gains that it saw in 2020 and 2021 anytime soon, now does look like a sensible time to accumulate some Solana, given its relative underperformance to rival Ethereum, the uptick in Solana NFT activity, and the ability to add to returns with staking rewards.