The venture capital firm just released its “State of Crypto” report, and Solana stole the show.
Andreessen Horowitz (also known as a16z) has established itself as one of the top venture capital firms in crypto, and made early investments in high-profile and successful projects like Coinbase Global, Uniswap, and Avalanche. Given its record of backing game-changers, a16z’s insights carry weight in the industry.
In its latest State of Crypto report, a16z offers valuable takeaways for investors, touching on trends like the success of stablecoins and the resurgence of DeFi (decentralized finance). However, among the standout assertions in the report are that Solana‘s (SOL 4.00%) growth is just beginning, and that its current price doesn’t reflect its potential. Here’s why a16z sees Solana as a major opportunity for investors.
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Solana’s growth is backed by metrics
As the demand for faster, more efficient blockchains rises, Solana has taken center stage thanks to its combination of fast speed, low costs, and scalability. As such, it has become one of the most promising and popular projects in the crypto ecosystem today, boasting more than 100 million active monthly users.
With its technical advantages and extensive user base, Solana has witnessed a surge in developer activity. Although not quite at the levels of Ethereum (the leading DeFi blockchain), Solana is in the early stages of building out its DeFi ecosystem. In the last year, several promising DeFi protocols (Jito, Kamino, Raydium) have seen a surge in activity, helping to raise the blockchain’s total value locked from just $300 million to more than $6 billion today.
In addition, Solana is at the forefront of the emerging Decentralized Physical Infrastructure Networks (DePIN) niche. Leveraging its high speeds and low costs, innovative projects like Helium (a decentralized wireless network) and Render (which distributes computing power for rendering graphics) are using Solana to build scalable, decentralized infrastructure that can power new use cases.
Going further down the development rabbit hole, a16z’s report highlighted that the Solana network saw the largest increase in the number of developers and project founders interested in building on its blockchain. That’s a major indicator of future growth. Developer engagement is vital in the blockchain market, as it fuels innovation and ensures future sustainability. The growing number of developers choosing Solana demonstrates that its technical strengths are being harnessed to build a thriving ecosystem.
Why Solana remains undervalued
In my opinion, not a16z’s, the growth and activity on Solana’s blockchain is remarkably similar to what Ethereum underwent in the last bull market. At the time, the blockchain was brimming with users and innovative applications, causing it to grow by more than 1,600% from 2020 to the end of 2021.
Yet, despite substantial growth in nearly every meaningful metric, Solana remains significantly undervalued compared to its historical price, and especially so if it follows Ethereum’s trajectory. At its all-time high in November 2021, Solana’s price was about $260. Today, its price is 36% below that mark, yet the fundamentals of the network are stronger than ever.
One possible reason for this undervaluation is the broader market sentiment surrounding cryptocurrency, which has shown momentum recently, but remains well off its 2021 highs.
However, for long-term investors, this presents a unique opportunity. The growth metrics highlighted in the a16z report show that Solana is more active and robust than it was when its price peaked. As market sentiment improves, Solana’s fundamentals make it a strong candidate for significant price appreciation and one of the best cryptocurrencies to own during this bull market.
RJ Fulton has positions in Coinbase Global, Ethereum, and Solana. The Motley Fool has positions in and recommends Avalanche, Coinbase Global, Ethereum, Render Token, Solana, and Uniswap Protocol Token. The Motley Fool recommends Helium. The Motley Fool has a disclosure policy.