Solana, Cardano: +$40 Billion Market Cap Cryptos That Could Challenge Ethereum

This article was written exclusively for Investing.com

  • Cryptocurrencies are gaining acceptance as market cap grows within the asset class
  • 2022 can be a year of success or failure for the asset class
  • Solana: The Fifth Leading Cryptocurrency
  • Cardano: The seventh leading name in the asset class
  • Invest only what you can afford to lose: SOL and ADA are liquid for trading purposes

When most market participants think of cryptocurrencies, it is the asset that dominates conversation and analysis. As the grandfather of the asset class, Bitcoin’s rise has been spectacular, going from five cents per token in 2010 to nearly $70,000 in 2021, sparking a speculative buying spree and pushing thousands of new cryptocurrencies into the market. In 2021, the value of Bitcoin increased by 57.81%.

It is the second leading cryptocurrency. It did better than Bitcoin last year. The value of Ethereum increased by 391.75% in 2021. Bitcoin is a medium of exchange, but the flexible Ethereum platform generated many new cryptocurrencies, which outperformed.

In early 2022, more than 16,650 tokens were deployed in the asset class, with the number of new arrivals rising every day. It is in the top ten, with market limits above 99.9% for the rest of the asset class.

Cryptocurrencies are gaining acceptance as the market capitalization of the asset class grows

In 2021, the market capitalization of the crypto asset class increased by 182.18%, reaching $2.166 trillion on December 31, from $767.482 billion at the end of 2020.

The significant increase in market capitalization was the result of increased use of the booming asset class. In 2021, more companies started accepting cryptocurrencies as a form of payment. Moreover, the speculative frenzy that has raised values ​​over the past years has continued to increase, pushing cryptocurrencies into the mainstream investment assets, where financial institutions allow clients to invest a percentage of their portfolios in crypto assets.

High-profile support from Tesla CEO Elon Musk and Jack Dorsey from Block didn’t hurt the encryption file. Some top-tier athletes and celebrities have even claimed cryptocurrency payments in 2021.

2022 could be the year of success

After hitting nearly $70,000 per token in mid-November, Bitcoin traded below $43,000 on January 11th. Ethereum peaked at around $4,900 on November 10, yet it was below $3,250 at the start of 2022.

Cryptocurrencies are facing constant upward and downward forces in 2022.

On the upside:

  • The speculative frenzy is likely to continue as the price of the tokens remains at the levels that created the fortunes.
  • The number of tokens continues to rise. The demand for cryptocurrencies is fueled by the growing number of options as market participants search for the next token to offer rewards similar to Bitcoin or Ethereum.
  • Cryptocurrencies are becoming more and more popular investment vehicles, encouraging market participants to diversify their portfolios to include exposure to cryptocurrencies.
  • Faith in fiat currencies is waning, making cryptocurrency a viable alternative.

On the downside:

  • Regulators are preparing to take a more important role in market supervision in order to “protect the public”.
  • Governments will eventually roll out digital currencies to compete with cryptocurrencies from a technological perspective.
  • Cryptocurrencies threaten the control of lawmakers and government officials over the money supply, something that governments will not compromise without epic value. Money is the root of power, and many government officials see cryptocurrencies as a challenge to their control.

At nearly $2 trillion on January 11, the cryptocurrency market cap was well below Apple (NASDAQ:), the world’s leading publicly traded company. At $2 trillion, cryptocurrencies do not pose a systemic risk to the financial system. However, if the market capitalization rises to $4 billion, or $5 billion or more, governments are likely to get nervous and crack down on cryptocurrencies. As hedge fund manager Ray Dalio said in 2021, governments have the power to “kill” an asset class, and the more successful it is, the more likely it is to “kill” cryptocurrencies.

Solana is the 5th leading cryptocurrency

On January 13, Solana was the fifth leading cryptocurrency. At $151.25 per token, SOL had a market capitalization of $47.40 billion.

Solana is a public blockchain platform that uses the Proof of Stake mechanism. Proof of Stake protocols are a class of consensus mechanisms for blocks that select validators in proportion to the amount and duration of cryptocurrency holdings. Proof of Work, the Bitcoin mechanism, is power-intensive, while Proof of Stake requires far fewer computations and less power, making it a more environmentally friendly protocol.

Solana is a potential competitor to Ethereum as it offers faster transaction speeds and lowers the associated costs.

SOL is another success story.

source: CoinMarketCap

The chart shows that SOL tokens entered the market in September 2020 at the level of 78.0 cents. They reached a high of $258.93 on November 5, 2021, just days before Bitcoin and Ethereum reached all-time highs. At $151.25 on Jan. 13, SOL was about 42% below its November high, while Bitcoin and Ethereum were down more than 38.2% and 34.2% from their highs.

Cardano: In seventh place

Cardano is an open source and decentralized public blockchain platform, with Proof of Stake protocol. Cardano has been around since 2015 and can facilitate peer-to-peer transactions using its ADA cryptocurrency. Cardano’s energy efficiency makes it a greener cryptocurrency because mining is not energy intensive.

ADA was the seventh leading cryptocurrency on January 13th. At $1.30 per token, its market capitalization stood at $43.45 billion.

ADA charts.

source: CoinMarketCap

The chart shows that ADA started trading in October 2017 at a price of 2.6 cents and rose to $2.9634 on September 1, 2021. At $1.30, the price is down 56% from the high. In early November 2021, ADA reached a lower high of $2.2735 and has underperformed Bitcoin, Ethereum, and Solana since November.

Invest only what you can afford to lose: SOL, ADA liquid for trading purposes

SOL and ADA are liquid cryptocurrencies that provide liquidity to traders with market limits on either side of the $40 billion level. However, the same risks to all cryptocurrencies are inherent in SOL and ADA, and investors should only disclose the capital they are willing to lose because the potential for big rewards comes with the risk of complete loss.

A proof-of-stake protocol that adopts a greener path is likely to be a bonus for the crypto asset class. However, the ups and downs of the asset class will define the path of least resistance for prices in 2022.