In brief
- Solana will outperform Ethereum this year, despite recent shifts in momentum, according to 21Shares’ Adrian Fritz.
- Ethereum’s ecosystem may be more mature, but Solana showed promise with a burst of activity related to meme coins in January, he said.
- Ethereum will crack its 2021 record price, but Solana will still outperform, he said.
Ethereum’s price has increased at nearly twice the rate of Solana’s over the past month, but the outperformance will likely be temporary, according to Adrian Fritz, head of research at Switzerland-based asset manager 21Shares.
Although Ethereum is the most secure and decentralized smart contract platform, Solana is still a smaller project with more upside, partly due to its community of developers that are constantly striving for “better execution,” he told Decrypt on Friday.
“Ethereum was almost on a pedestal, looking down at other layer-1 chains, and they kind of got lazy,” Fritz said. “Solana, on the other hand, is way more commercially minded.”
Ethereum’s price has jumped 43% over the past month to $3,600 as investors have grown less concerned about the Ethereum Foundation’s perceived lack of engagement and the potential value of layer-2 networks. The non-profit committed itself to addressing these issues months ago. Still, ETH is trading 26% below its pandemic-era high of $4,900 in 2021.
Nearly 60% of Myriad Markets users predict that Ethereum will reach a record high this year. (Myriad Markets is a product of DASTAN, Decrypt's parent company.)
Fritz believes the second largest cryptocurrency by market cap will set a new all-time high this year but fall well short of the $10,000 mark that some bulls, including Fundstrat co-founder and Fundstrat co-founder Tom Lee, have recently penciled in. Solana will meanwhile climb to $337 from $178, an 89% jump, he said, as it continues “becoming a blue-chip altcoin.”
Robinhood’s recently unveiled efforts to build an Ethereum layer-2 scaling network was a notable catalyst for Ethereum because it highlighted how traditional finance could leverage Ethereum’s network as a global settlement layer for existing products, Fritz said. At the same time, Kraken is pushing so-called xStocks on Solana and other layer-1 networks.
“Solana is more centralized, but it’s way faster and cheaper,” Fritz added. “So for anything [involving] trading, obviously, a lot of institutions will kind of lean towards Solana.”
At the same time, Fritz acknowledged that many mainstream investors don’t fully understand Solana’s value as a faster network that can be grown quickly at low cost.
Many ask Fritz if the chain is “just for meme coins and speculation,” he said.
When activity on Solana ran red-hot in January alongside the debut of U.S. President Donald Trump’s meme coin, Fritz said it was the “perfect battle test” showing Solana could become a major trading venue globally, potentially for tokenized assets.
Institutional adoption of both networks is likely to increase with the passage of stablecoin legislation. And the same narratives driving Solana and Ethereum’s price could play a role in which networks companies chose for issuing dollar-pegged tokens, Fritz said.
“Within the team, it's kind of a hot debate,” he said, referring to other 21Shares analysts. “The rivalry between the two chains is definitely on.”