Bitcoin (CRYPTOCURRENCY: BTC) has undergone four “halvings,” which cut the cryptocurrency’s mining rewards in half, every four years since 2012. Bulls view these events as major catalysts for Bitcoin because they restrict its supply.

Bitcoin’s price surged 109% in the 12 months leading up to its latest halving on April 19. That rally, which was amplified by hopes for lower interest rates and the approvals of the first spot-priced Bitcoin ETFs in January, also boosted other cryptocurrencies.

Image source: Getty Images.

However, Bitcoin’s price has fallen by about 2% since that fateful day. This pullback suggests that many investors bought Bitcoin ahead of the halving, but the lack of additional catalysts may be deterring new investors from jumping in.

So instead of focusing too much on Bitcoin right now, investors should pay more attention to other smaller cryptocurrencies that have been generating bigger gains. One such token is Solana (CRYPTO: SOL), which soared 472% in the 12 months leading up to the Bitcoin halving and gained another 8% in the months after. Is it a no-brainer buy now?

The Difference Between Bitcoin and Solana

Bitcoin is mined with an older, more energy-intensive proof of work (Beat) method, while Ether (CRYPTOCURRENCY: ETH), Solana and other newer cryptocurrencies are mined using the faster and more energy-efficient proof-of-stake (PoS) method.

PoS blockchains support smart contracts, which can be used to develop decentralized applications (dApps), games, non-fungible tokens (NFTs), and other crypto assets. PoS tokens can also be “staked” (locked) on the blockchain for a period of time to earn rewards. PoW blockchains are natively only used to mine cryptocurrencies directly.

Simply put, PoW tokens are valued for their scarcity, while PoS tokens are valued for the growth of their ecosystems. This is why cryptocurrency investors generally favor PoS blockchains, which have the highest transaction speeds and lowest fees.

Why are investors excited about Solana?

Solana is the world’s fastest PoS blockchain. It is built on the same PoS technology as Ethereum, but speeds up the process with its own Proof of History (PoH) method. This upgrade allows Solana to process transactions 46 times faster than Ethereum and five times faster than its closest competitor. Polygon (CRYPTO: MATIC). However, Solana has only reached about 1.6% of its theoretical maximum speed — so it could significantly widen its lead against Ethereum, Polygon, and other PoS blockchains.

Solana’s speed is driving the rapid expansion of its ecosystem. It has been used to develop decentralized exchanges like Jupiter and Orca, as well as popular meme coins as BONK It is Married woman. It helps Visa (NYSE: V), PayPal (NASDAQ: PYPL) and Circle settle their stablecoin transactions and have integrated their payment protocol Solana Pay into Shopify(NYSE: SHOP) e-commerce services. Solana even launched its own Android smartphone for Web3 apps, the Saga Phone, last year. It’s still a niche device, but it features its own dApps Store as an alternative to AlphabetGoogle Play Store. This continued expansion should stabilize and increase the value of Solana’s native cryptocurrency in the coming years.

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Will Solana overcome its short-term challenges?

Solana has faced three major headwinds over the past two years. First, it suffered a series of network congestions and security breaches as it dealt with a growing number of spam transactions. Second, the bankrupt cryptocurrency exchange FTX — which had been one of Solana’s biggest backers — hastily liquidated its tokens at a discount to pay off its creditors. Finally, rising interest rates have driven investors away from Solana and other speculative cryptocurrencies.

But looking ahead, most of these headwinds should dissipate. Solana developers are trying to address its congestion and security issues with new updates, and FTX finally completed its $2.6 billion discounted Solana token sale in May. If interest rates stabilize and decline in the coming quarters, the crypto market should heat up again.

So is it the right time to buy Solana?

Solana, like many other cryptocurrencies, seemed to lose its luster following Bitcoin’s spot price ETF approvals and halving earlier this year. However, I believe that complacency has created a great buying opportunity in promising tokens like Solana — which has clear long-term advantages against Bitcoin, Ether, and other PoS tokens.

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Alphabet executive Suzanne Frey is a member of The Motley Fool’s board of directors. Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Bitcoin, Ethereum, PayPal, Polygon, Shopify, Solana, and Visa. The Motley Fool recommends the following options: short June 2024 $67.50 calls on PayPal. The Motley Fool has a disclosure policy.

Is Solana an obvious buy after Bitcoin halving? was originally published by The Motley Fool

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