Is Solana's Slump a Buying Opportunity?

Solana (CRYPTO: SOL) is hovering around its lowest price in over a year. That comes after an impressive run took it to a new all-time high in January. The slump is partly due to a wider drop in crypto prices, but there are also some Solana-specific factors at play.

Before you buy the dip, it's important to understand what's driven its recent ups and downs, as well as how its underlying technology works. Its superfast speed and low transaction fees have made it a popular space to build new projects, particularly meme coins. However, security remains a major red flag.

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As a long-term investment, I worry that Solana has grown too fast and compromised on security along the way. That's a reason to be cautious, even at today's relatively low price.

Solana's roller-coaster ride

Even by crypto standards, Solana has had an extraordinary run. It was one of the top 10-performing cryptocurrencies of 2021, with gains of over 10,000%, per CoinGecko data. Back then, smart contract cryptos were all the rage, and investors flocked to the project because of its high speed and low transaction costs.

Smart contracts are tiny pieces of self-executing code that live on the blockchain. Developers can use them to build non-fungible tokens (NFTs), as well as power decentralized finance apps, build games, and launch other cryptocurrencies. Market leader Ethereum (CRYPTO: ETH) hosts the lion's share of projects, but investors are looking for the next big thing.

Here's why Solana could be a good long-term investment

Solana's biggest strengths are its superfast processing speed and low transaction costs. According to CoinLedger, Solana boasts 2,600 transactions per second (TPS). For context, Ethereum manages 15-30 TPS, and Polkadot processes 1,000 TPS. Its unique proof-of-history model builds timestamps into the blockchain.

Importantly, people are using Solana's system. One way to measure the performance of smart contract blockchains is the amount of money on each ecosystem -- known as total value locked (TVL). In 2021, Ethereum accounted for over 95% of the TVL, according to DefiLlama. By March 2025, that figure fell to around 50% of the TVL. The rest of the money is now on other blockchains, including Solana, which is in second place with over 7% of the TVL.

Outside the developer action, Solana is gaining credibility. For example, the SEC is considering applications for spot Solana ETFs from Bitwise, 21Shares, VanEck, and Grayscale. SEC approval would give Solana more weight, potentially opening the door for increased institutional investment.

Similarly, in early March, President Trump posted that Solana would be included in the U.S. Strategic Bitcoin Reserve. The details of how the reserve might work are still under development, but Solana's inclusion consolidates its position as a top coin.

Image source: Getty Images.

What could hold Solana back

With so much going for it, you might wonder why Solana's price has fallen so dramatically. One reason is that cryptocurrency prices are highly speculative and rise and fall based as much on consumer sentiment as concrete drivers. For Solana, sentiment soured recently.

Solana had been riding high on a meme coin wave after $LIBRA, $TRUMP, and $MELANIA coins launched on its platform. But that changed as investors lost millions with $LIBRA in what's now viewed as a rug pull.

Meme coins come and go. In the long term, I'm more concerned about whether Solana -- which is only five years old -- sacrificed security for speed. It has already suffered several serious security breaches, including a $326 million wormhole hack in early 2022.

In 2023, researchers at The Ruhr Institute for Software Technology found 14 serious bugs that could be exploited by hackers. Not only that, but they said Solana's blockchain was vulnerable to "specific attack possibilities" that are hard to defend against.

Is Solana a buy?

Buying the dip is always easier said than done -- not least because it's hard to know whether the price has truly bottomed out. Rather than try to time the dip, think about how Solana might perform over the long term and how it compares with other smart contract cryptos.

There's always a correlation between risk and reward. Solana is riskier than, say, Ethereum, but it may still offer higher investor rewards. As with all cryptocurrency investing, make sure you understand the risks and ensure your crypto investments are part of a balanced portfolio.

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Emma Newbery has positions in Ethereum and Polkadot. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.