With the price of Solana (CRYPTO: SOL) surging past $250 and lingering relatively near its all-time high of $293, it's an exciting time to be an investor in one of the most dynamic blockchains out there right now.
But, like with all cryptocurrencies and all investments, there's a slew of mistakes most investors will make at one point or another. Under the worst conditions, stumbling into these pitfalls could cause a serious financial setback, so let's drill down and look at three of the most common mishaps and prepare you for how to avoid them this year and beyond.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
In the last three months alone, the price of Solana is up by more than 50%.
If you're like most people, seeing a return like that in your portfolio ignites a burning desire to add to your holdings, with the idea being that the price will continue to rise. It's easy to get carried away and invest a lot of your capital in a short period, especially if you tend to be especially vulnerable to experience fear of missing out (FOMO).
In crypto, what goes up often must go down. Overinvesting is a mistake that you're the most likely to make when attention surrounding a cryptocurrency like Solana is at its height, which is paired with rising prices and potentially a bout of euphoria.
One way to think about how to approach this issue is to think of it like eating a healthy and well-balanced diet. As much as you might crave the extreme sweetness of an ice cream sundae for dessert, it isn't appropriate to eat one every day, and especially not if you aren't getting enough vegetables and hardy sources of protein.
Make sure that your portfolio is fully diversified before starting or adding to your Solana position. You should have a mixture of cash, stocks, bonds, and index funds to pack your portfolio with safer investments and exposure to sources of moderate growth before dabbling in the investments that are on the very risky end of the spectrum, like almost every cryptocurrency.
There is a good chance that Solana will see its value continue to increase over the next year or so. Between rising global liquidity, the high probability of new regulatory tailwinds forming, the advent of presidential meme coins, the potential approval of Solana exchange-traded funds (ETFs), and a cryptocurrency sector that's looking increasingly vibrant, it's boom time for holders. That doesn't mean it's a good idea to invest in Solana if you aren't willing to hold it for at least a few years.
In all probability, it'll take a long while for the full strength of all of those factors to play out. Selling before that risks missing out on the gain. More importantly, if you invest with the idea that you're only holding on to your Solana for the short term, you're very likely to panic and sell your coins in the event of a sharp downturn.
And with cryptocurrency investments, those sharp downturns and a general state of high volatility are the norm. Moves of more than 10% within a single day may be uncomfortable for you to experience, but they're common.
In the longer-term view of things, those fluctuations aren't troublesome at all. So don't make the mistake of planning for a quick flip of your investment, as even in a bullish case like Solana is facing, there's bound to be quite a few opportunities to fumble your wealth along the way.
Today, Solana is a chain in its ascendancy. In yesteryear, other chains held that same distinction. Now, you and other investors might not even recognize the names of those former champions.
Cryptocurrencies are an asset class that's still emerging. There is a very high probability that the best blockchains of today will be surpassed by others in the future, even if they remain good investments, as that's happening. And if you become complacent and assume that Solana or any other cryptocurrency is going to remain in vogue forever, eventually it'll cause you to experience losses.
Of course, Solana is in active development, so it can be improved or changed to better account for the presence of competing chains. Nonetheless, the only way you'll understand whether Solana is remaining competitive is if you continue to stay abreast of what's going on with its development and in the larger crypto ecosystem.
For a long-term-oriented investor, it's perfectly fine to limit your ongoing research into Solana to once every few months. Just remember that if you don't appreciate the details and updates occasionally, it's easy to get caught by surprise when a competitor rises.
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
Learn more »
*Stock Advisor returns as of January 21, 2025
Alex Carchidi has positions in Solana. The Motley Fool has positions in and recommends Solana. The Motley Fool has a disclosure policy.