Solana Shines Bright - Issue #23
In this newsletter, we are profiling Solana [SOL]. In previous newsletters, we have profiled Bitcoin, Cardano, Theta, Uniswap and many others. Access all our newsletters in our archives at madcapx.substack.com.
The Short of It
With so many blockchains, Solana does edge them all out in a few important areas. Will this be good enough to drive more developers to build on it? What sort of gains could be ahead for the SOL token if they get it right? They are so new that their launch is no older than the beginning of the pandemic lockdowns.
Solana (SOL) was officially launched in March of 2020 by the Solana Foundation, with headquarters in Geneva, Switzerland. The most influential person behind Solana is Anatoly Yakovenko, previously of Qualcomm. He teamed up with his Qualcomm colleague, Greg Fitzgerald, to make the Solana Foundation. This blockchain project’s primary goal is to allow the development of permissionless, scalable, and decentralized applications (DApps) without resorting to layer-2 technologies such as sharding. This is to facilitate large-scale accessibility to the decentralized finance sector.
With lightning-fast processing time for smart contracts, Solana features a decentralized clock technology (used in their Proof-of-History consensus method), which is used to stamp blocks. The clock ticks every 500 milliseconds, leading them to make the claim of supporting up to 50,000 transactions per second. Coding can be done in Rust, C, or C++ with flexible virtual machine integrations.
The underlying Proof-of-Stake (PoS) consensus of Solana is combined with Proof-of-History (PoH) and is used as a monitoring tool for the PoH processes, validating each sequence of blocks produced. The Solana ledger itself works as a reliable network clock, allowing for many technological blockchain enhancements.
There is a total of 489 million released SOL tokens in circulation, which are used to pay for transactions and are burned in the process. They promise low fees for applications even with millions of users.
If you want to run a validator node to get staking rewards, there is no minimum stake requirement. Although, if your node is found to be a bad actor, you will face slashing penalties. Losing up to 100% of your stake is possible. The hardware and network requirements for running a validator node are very high, and as such, most people will just delegate to a staking node.
A challenge, called “Tour de SOL,” taking place on their testnet, allows for getting rewards by running a testnet node and also participate in their bug bounty program to find flaws and bugs in their network to be rewarded with SOL tokens. Another way to earn SOL is to join their Collective and become a community evangelist, meetup organizer, or social media channel moderator.
The ecosystem has quite a few partnerships, collaborations, and integrations already listed. With DApps as a priority, you can be sure this list will only grow larger. Maybe it is time to catch some sun with SOL.
SOL/BTC pairing has only been trading for about one year. This doesn’t give us enough history for the weekly chart. However, we do see plenty of volatility from the two waves up of over 700%. This last one is very similar to many other altcoins that started their bull runs in early January 2021. A good time to enter into a trade is when you are getting the second green candle, and the downward trend lines have broken. SOL has had plenty of upside over the last 3 months and could use some pullback before continuing up.
Solana has a market cap of 4.9 billion currently. It is ahead of Cosmos by 13% and Avalanche by 28% in market cap. But behind Polkadot by 630%, Cardano 775% and Ethereum a massive 4180%. If Solana becomes a real competitor to the chains ahead, we could see more price increases for the SOL token.
Here’s a comparison of Solana to a few of its rivals. In the first row, you see Transactions Per Second (tps). First off, Visa processes about 1,700 tps but can handle 65,000. Ethereum, which is the largest smart contract blockchain at about a $200 billion market cap and $20 billion in volume, only does 15 tps, where Solana is estimated to be able to do 50,000.
Cardano is not listed on the above chart but is working on a second-layer solution called Hydra. It could scale to whatever size that is needed, and the founder is quoted as saying that “Cardano will be the fastest system in the world.” For example, if one million tps is needed, then it can scale to that. This could also benefit other blockchains in the future, such as Bitcoin and the lightning network, since it could be shared with other networks. The BTC network maxes out at 7 tps and, in reality, only does about 3-4 per second.
The Other Trend Lines
As usual, we will look at BTC/USDT and what sort of trend lines it is in. On this daily chart, Bitcoin continues to look very bullish and does not show that it is about to break the trend up. So far, we have had 3 corrections over the last four months. In this chart, you can see the psychological support of $50,000 held together. However, we could have gone down to $48,000 support or even as low as $45,000, but that would have broken these trend lines upwards. If we break all-time highs this next week, the top of the trend line is at about $70,000+.
ADA/BTC on the daily is currently in a slight bear trend. Wait for a day candle to close outside of the trend and then continue a second day above to confirm it is changing direction.
ETH/BTC on the weekly chart has it close to the bottom of the support. Is ETH ready now or in the next couple of weeks to go back into a strong bull move up, and will we see it stay within these trend lines? As you can see, the last time it bottomed, it shot back up over 100%, but so did most of the top altcoins.
In comparison, ETH gained 100% in 6 weeks, ADA gained 540% in 9 weeks, and SOL made a gain of 920% in 8 weeks. ETH has since had a correction of 36%, ADA a correction of 45% and SOL 35%. So was that it for the corrections? Well, if BTC is leading the way back up, maybe we are done correcting, and April will be more upside all around.
This portfolio section gives you an idea of what sort of return you can get when investing in crypto assets.
BTC/USD FUND is up 438% since October 1st, 2020. Since this is a long-term holding, it is best kept in cold wallet storage or a safe custody solution. We continue to see a long-term hold position as our best stable alternative. This past week bitcoin has been ranging between $50,400 and $58,400 USD in value.
FUND 3 started on November 16, 2020, with $1000 USD in value and invested into BTC, LTC, ETH, and ADA. The total amount of BTC value from the four coins has a gain of 39% since the start. The USD fund value is up 384% since the start. We will hold these positions to see how well it does against our BTC-only portfolio. LTC is in the minus by 21% against BTC. ETH is holding steady at 14% against BTC. ADA continues to outshine the other altcoins in this fund with a gain of 235% against BTC and 1056% to USD.
BLWX Fund started on February 22, 2021. They all are assets we have profiled in the last few months, and we are interested in how they will perform in 2021 against BTC. BAT is up 92% against BTC since the start; LINK is down at -14%, WAVES is up 3%, XMR is -4%. Overall, against BTC, the fund is up 19% thanks to BAT.
Overall, Bitcoin should be your first choice as an investment in crypto, though many altcoins can give you amazing gains if you manage your risk. As a long-term investor, we see it as our largest portfolio investment. If you are a day trader, there are many great assets to put on your watch list. Look through our previous newsletters to find some. Madbyte does have its own token called MADX and is available within our member website.
MadCapX research newsletter is written by the Madbyte Team. You can learn more about Madbyte and MadCapX on our websites. This weekly newsletter is a paid subscription and supports the team and the Madbyte projects. The regular cost is $5/month or $50/year. Cancel anytime.
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Disclaimer: Nothing in this newsletter is intended to serve as financial advice. Therefore, do your own research and due diligence before applying any of the techniques highlighted in this post. Any risks or trades based on this newsletter are committed at your own risk.