of S&P500 (SNPINDEX: ^GSPC) The total return of the market index in 2024 will be 25%. It’s been a great year for the stock market, but not as good as the crypto market.
According to CoinMarketCap, the total market value of each cryptocurrency will be $1.65 trillion at the end of 2023. As of December 19th, the total market capitalization reached $3.3 trillion, which means it has doubled in less than 12 months.
Cryptocurrency Pioneer Bitcoin (Cryptocurrency: BTC) It increased by 138% over the same period. smart contract innovator Solana (Code: SOL) showed a 101% increase, slightly outpacing the crypto sector as a whole.
But if you zoom out a little, the picture changes. Starting from the doldrums in December 2022, Solana is head and shoulders above Bitcoin and the stock market with a 2,000% price increase.
Solana therefore has a recent history of outperforming Bitcoin, even though larger cryptocurrencies have enjoyed very impressive returns over the same period. It would be great if the trends of the last two years continue beyond 2025.
Is this a good time to rebalance your crypto holdings by exiting Bitcoin and buying more Solana instead?
First, let me point out that Solana’s recent price spike started from a very low point.
Caught up in the collapse of Sam Bankman Fried’s cryptocurrency exchange FTX, Solana recently plummeted from $259 per token to $10 per token in about a year.
It’s not easy to recover from such a drop, but it’s still an easier task than rising quickly from a lofty starting point. Bitcoin was also affected. FTX fiascobut the price drop was much smaller than Solana. In other words, Solana’s impressive gains since summer 2022 were aided by an artificially low starting price.
On the positive side, Solana is ready to perform. Cryptocurrencies remain top performers when it comes to rapid execution of smart contracts, suitable for automating financial transactions and other asset-based changes.
In particular, Solana’s fast contracts are useful for managing these large numbers of decentralized programs simultaneously in time-sensitive situations. Mobile gaming comes to mind, along with blockchain-based trading platforms and non-fungible token (NFT) sales. Someday, you might even be able to buy chewing gum and gasoline with Solana’s easy transactions. That’s what cryptocurrencies with smart contracts and fast transaction settlement can do.
Therefore, it makes sense that Solana has returned to the top 10 list of large and popular cryptocurrencies. Owning Solana in 2024 is probably a good idea, as this token is likely to be widely used in real-world applications in the coming years.
But can Solana outperform Bitcoin at this point? Perhaps, but I’m not sure. Bitcoin has too many growth drivers.
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Bitcoin recently updated its economic features for the fourth time, halving the amount of coins issued when a new block of Bitcoin transaction data is processed. These halvings have historically resulted in impressive price increases after about a year, and there is no reason to believe this cycle will change.
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Exchange-traded funds (ETFs) based on the latest Bitcoin prices have been around for about a year. Their introduction was expected to bring a lot of new money into the cryptocurrency market using tools that are familiar to any stock investor. So far, about 5.2% of all Bitcoin has flowed into Spot Bitcoin ETFs. iShares Bitcoin Trust (NASDAQ:IBIT). Capital inflows picked up pace in November, but this week’s disappointing economic report led to the largest single-day outflow on record. Even Bitcoin and its ETFs are still very volatile.
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The Bitcoin frenzy in November was based on the election results. The incoming Trump administration has brought a positive attitude toward cryptocurrencies on Capitol Hill and in the White House, and the president-elect has included support for cryptocurrencies in his election campaign. Among other things, this regime change could lead to the creation of a national Bitcoin reserve, which would further increase scarcity on the public market and drive up the price of the cryptocurrency.
We can bore you to tears with technical data and promising market trends, but you will understand that Bitcoin is not standing still. Solana will need to work hard to defeat this giant company in the long run.
It may sound strange given Bitcoin’s long history of wild price swings and continued volatility, but digital gold is evolving into an asset that holds solid value. There is no “safe bet” in the cryptocurrency market, but Bitcoin comes pretty close. The rapid turn of events could make Solana a footnote in crypto history, but massive changes are needed to make Bitcoin obsolete.
As a long-term investor, I would rather hold large amounts of Bitcoin and make smaller, more speculative investments in Solana than the other way around. To be clear, I own a little bit of both. Still, Bitcoin’s future price movements will make a much bigger difference to my nest egg than it did for Solana.
That’s the way I like it. Your mileage may vary, but to me Bitcoin looks like a stronger investment idea.
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anders byland I have positions in Bitcoin and Solana. The Motley Fool has a position in Bitcoin and Solana and recommends Bitcoin and Solana. The Motley Fool has Disclosure policy.
Should you forget about Bitcoin and buy Solana instead? Originally published by The Motley Fool
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