With a recent flip of BNB ($93M), Solana is now Crypto #4 and is closing in on Tether's USDT ($133M) for market cap. We should expect to see SOL surpass USDT and take third place, behind Bitcoin and Ethereum, sooner rather than later. Or should we?
With a meteoric rise in market capitalization, Solana has shown itself to be a serious competitor. Solana has emerged as a frontrunner in the industry, thanks to its groundbreaking blockchain technology and growing ecosystem. In terms of market capitalization, Solana has recently overtaken Binance Coin and is now second only to the market leader in stablecoins, Tether (USDT).
In light of this news, many are wondering whether Solana will eventually surpass USDT and take third place among cryptocurrencies.
Considering how new Solana is to the crypto arena, its rise is all the more remarkable. A large number of developers and users have been drawn to the platform due to its low transaction costs and high throughput, which has resulted in increased adoption.
A lot of people in the cryptocurrency community are wondering if Solana will be able to keep going strong and eventually have a market cap higher than USDT.
This would be a huge step forward for Solana and a reflection of the changing dynamics of the cryptocurrency market as a whole.
But some experts already go as far as to say that once Solana flips USDT its next stop might be flipping Ethereum, the king of altcoins.
Current Cryptocurrency Market Landscape
The cryptocurrency market is led by Bitcoin, Ethereum, and Tether. Bitcoin remains the dominant force, with a market cap exceeding $1 trillion. Ethereum follows, boasting a market cap of over $500 billion, driven by its robust smart contract capabilities and widespread adoption in decentralized applications (dApps). Tether, the largest stablecoin, maintains a market cap of approximately $130 billion, serving as a critical liquidity provider across various trading platforms.
But Solana’s recent performance has been remarkable.
The platform’s market cap surged past $110 billion, a milestone achieved by only a select few cryptocurrencies. This surge enabled Solana to surpass BNB, which currently holds a market cap of around $90 billion. The flip occurred amid Solana’s impressive price rally, with SOL reaching a three-year peak of over $245.
Several factors have contributed to Solana’s rapid ascent. The platform’s high-performance blockchain, capable of processing thousands of transactions per second with minimal fees, has attracted developers and users alike. Additionally, Solana’s expanding ecosystem, including decentralized finance (DeFi) projects has bolstered its market position. The recent memecoin frenzy on Solana’s network further amplified its transaction volume and user engagement.
Conditions for Solana to Surpass USDT
For Solana to overtake Tether and become the third-largest cryptocurrency by market cap, several conditions must be met:
- Sustained Price Appreciation: Analysts suggest that Solana’s price would need to reach approximately $270 to surpass USDT’s market cap. This would require continued investor confidence and market momentum.
- Ecosystem Expansion: Ongoing development and adoption of applications within Solana’s ecosystem, particularly in DeFi and NFTs, are crucial. Increased utility can drive demand for SOL tokens, positively impacting its price.
- Institutional Investment: Growing interest from institutional investors, potentially through vehicles like exchange-traded funds (ETFs), could provide significant capital inflows. Reports indicate that the U.S. Securities and Exchange Commission (SEC) is engaging with issuers interested in launching a Solana spot ETF.
- Network Stability and Security: Maintaining a secure and reliable network is essential to sustain user trust and adoption. Any technical issues or security breaches could deter potential users and investors.
- Regulatory Clarity: Clear and favorable regulatory frameworks can facilitate growth. Uncertainty or adverse regulations could hinder Solana’s expansion and market performance.
Potential Obstacles
Solana’s rapid ascent in the cryptocurrency market is noteworthy. But several potential obstacles could impede its ability to surpass USDT in market capitalization.
Some of them look pretty serious.
- Market Volatility
The cryptocurrency market is inherently volatile, with prices subject to rapid and unpredictable fluctuations.
For instance, in November 2022, Solana’s price dropped by 40% in a single day following the bankruptcy of FTX, as Alameda Research, a major holder, liquidated its SOL holdings. Such events can significantly impact investor confidence and market dynamics.
- Competition from Other Blockchains
Solana faces stiff competition from other blockchain platforms like Ethereum, Binance Smart Chain, and emerging networks. Ethereum’s market cap exceeds $500 billion, reflecting its dominant position. BNB also maintains a substantial market cap, posing a challenge to Solana’s growth trajectory.
- Technical Challenges and Network Stability
Solana has experienced multiple network outages, raising concerns about its reliability. For example, in September 2021, the network was offline for nearly 18 hours due to a surge in transaction load. Such incidents can deter developers and users, affecting adoption rates.
- Regulatory Risks
Regulatory scrutiny poses a significant risk. In June 2023, the U.S. Securities and Exchange Commission (SEC) sued Coinbase, alleging that Solana and other cryptocurrencies offered by the platform qualified as securities. Such legal challenges can impact market perception and accessibility.
- Liquidity and Market Depth
Achieving a higher market cap requires substantial liquidity and market depth.
While Solana’s trading volumes have increased, they still lag behind those of more established cryptocurrencies. Insufficient liquidity can lead to higher price volatility and hinder large-scale investments.
Prospects of Surpassing Ethereum
There isn't much distance that Solana needs to cover to flip USDT. But some experts already say that Solana's next goal is to take Ethereum's place as the leader.
Many technological and market value improvements have been made to Solana and Ethereum recently, making them two well-known blockchain platforms.
Since its start in 2015, Ethereum has been a leader in the fields of smart contracts and dApps. Ethereum is switching from a Proof of Work (PoW) to a Proof of Stake (PoS) consensus mechanism. This change, called Ethereum 2.0, is meant to make the system more scalable and use less energy. This update should speed up transactions and lower fees, fixing some problems that have been plaguing the network for a long time.
Solana, which came out in 2020, on the other hand, was made from the start to be very fast. Solana is said to be able to handle up to 65,000 transactions per second (TPS) with very low fees. This is possible by using a unique Proof of History (PoH) consensus along with Proof of Stake (PoS).
Because of this, more and more developers and projects are joining its ecosystem. Notably, Solana's ecosystem has grown to include DeFi apps, NFTs, and other decentralized apps, which has helped it become popular and grow quickly.
But for now, it doesn't seem right to think of Solana as a major threat to Ethereum.
Trends in market capitalization show how these two platforms are changing over time.
As of November 27, 2024, Ethereum still has a big lead. Its market cap is over $429 billion, which shows how well-known and widely used it is. Even though Solana is still behind, it has grown very quickly and now has a market cap of about $114 billion.
Even though Solana is growing quickly, Ethereum's strong position, large developer community, and ongoing upgrades make it very hard for Solana to pass it in market capitalization.
Solana’s price would need to increase by approximately 255% from its current price of $240 to reach around $895 per SOL, thereby matching Ethereum’s current market capitalization, assuming Ethereum’s market cap remains constant and Solana’s circulating supply does not change.
Ethereum must have something unbelievably bad happen while Solana has something unbelievably good happen. The only way we can see Solana growing faster than Ethereum soon is if they do that.
Solana is still a strong competitor in the blockchain space, though, thanks to its focus on high performance and scalability.
Final Thoughts
Solana has never been so strong. And its rapid rise in the cryptocurrency market underscores its potential as a leading blockchain platform.
Surpassing Tether to become the third-largest cryptocurrency is within reach, provided that Solana continues its trajectory of growth, innovation, and adoption. However, the path is fraught with challenges, including market volatility, competition and a great deal of luck, of course.