Can Solana flip Ethereum? What this means for your portfolio

Solana has rallied 70% against ethereum in 2024. The smart contract blockchain's native token has become a strong contender against Ether, even as its market capitalization is almost a third of ethereum's.

The ongoing debate in terms of Solana (SOL) overtaking ethereum (eth) is supported by bullish on-chain metrics, SOL's dominance in DEX metrics, volume and protocol revenue. Solana hit an all-time high against ethereum on Monday, November 18, when SOL/eth rose to 0.07977.

<h2 class="wp-block-heading" id="solana-could-overtake-ethereum-on-chain-metrics-suggest”>Solana Could Overtake ethereum, On-Chain Metrics Suggest

Solana's protocol fees, a small percentage of the transaction value that is collected to maintain and facilitate commerce on the blockchain, are almost double those of ethereum as of November 2024.

While the monthly date is incomplete, available data suggests that Solana has raised $343.96 million in protocol fees versus ethereum's $178.65 as of Tuesday, November 19. For a blockchain, once liquidity providers are paid, protocol fees are added to the project's revenue.

Therefore, the metric suggests higher revenues for Solana, compared to ethereum, in October and November 2024.

Another key metric is the trading volume on decentralized exchange platforms, or DEXs. In the case of Solana, DEX volume is almost double that of ethereum in November. In October, SOL ranked higher in DEX volume, although by a relatively smaller margin.

Solana DEX volume is $77.51 billion versus $38.81 billion for ethereum. For the month of October, Solana stood at $52.5 billion versus $41.4 billion for ethereum.

Higher DEX volume translates into higher utility and adoption of one chain compared to the other. Solana has been preferred by traders on decentralized exchanges, likely due to the high volume of new projects on the Pump.fun launchpad, listing on DEXs like Raydium after reaching a key threshold.

Solana is therefore emerging as a clear favorite among decentralized traders and platforms, according to data from TheBlock.

ethereum dominates the circulating supply of stablecoins and the total value of cryptocurrencies (TVL) is locked on the chain.

Solana struggles to compete with ethereum on these metrics by a wide margin, falling behind as eth benefits from its first-mover advantage. It is likely that with continued adoption and demand, Solana could surpass ethereum in these metrics in the long term.

<h2 class="wp-block-heading" id="how-solana-could-overcome-challenges-and-flip-ethereum“>How Solana Could Overcome Challenges and Change ethereum

The Solana ecosystem is seeing the addition of new stablecoins, which will likely increase the circulating supply of stablecoins and the TVL metric. Sky, a decentralized financial borrowing and lending protocol formerly known as Maker, has deployed its USDS stablecoin on Solana.

This marks the first launch of a native DeFi stablecoin on Solana, which could boost the ethereum competitor's DeFi liquidity.

Solayer launched sUSD, a stablecoin backed by real-world assets on the Solana blockchain last week. The token derives its value from a diversified basket of low-risk assets, starting with US Treasury bills, setting it apart from all other stablecoins.

Similar developments on the Solana network could help SOL overcome the network effect and first-mover advantage of Vitalik Buterin's ethereum blockchain, paving the way for a “flippening” in the future.

<h2 class="wp-block-heading" id="why-this-matters-implications-for-your-crypto-portfolio”>Why this is important, implications for your cryptocurrency portfolio

Solana-based meme coins surpassed $22 billion in market cap, and 70% of the top 10 meme tokens have posted double-digit gains over the past seven days, CoinGecko data shows.

Solana's rise against ethereum has likely catalyzed gains in its ecosystem tokens, fueling meme coin rallies and raising the sector's overall market capitalization. This has a positive impact on cryptocurrency wallets that hold cat and dog-themed and political meme tokens along with Solana.

ethereum's beta plays are the Layer 2 token ecosystem and Layer 3 projects; both categories are struggling to gain traction in the current cycle.

Cryptocurrency traders who hold Layer 2 and 3 tokens with staking, re-staking, and Layer 3 tokens are likely to see unrealized losses in their portfolio as ethereum struggles in the face of competition from alternatives like Solana.

Solana Hits ATH Against Ether, Expect This From SOL Price

Solana hit a record high when trading against ethereum, at 0.079770 on Monday, November 18. The milestone is key for Solana, the SOL/USDT pair is less than 10% from its previous all-time high of $259.90 from November 2021.

The SOL/eth pair shows room for further gains and a retest of the all-time high at 0.079770, a 5% rally from the current level. SOL is currently trading above the three exponential moving averages of 10, 50, and 200 days, and has been in an uptrend for almost five months.

Technical indicators, the Relative Strength Index at 66 and the Moving Average Convergence Divergence indicator, with green histogram bars above the neutral line, support a bullish thesis for the SOL/eth pair.

If Solana breaks its all-time high and extends its gains, the SOL/eth pair could target the 0.090000 level, 13% above its all-time high.

The SOL/USDT pair is trading at $238.56 on Wednesday, November 20, 8.95% below its all-time high. Technical indicators suggest that the pair is likely to see further gains and SOL could return to its all-time high.

A successful retest of this level and a breakout could push Solana towards the psychologically important $300 mark, 15% above its all-time high of $259.90.

The RSI reads 73, although traders may consider this as a sell signal, the impressive oscillator shows higher and higher green histogram bars and the MACD shows no signs of a trend change.

The momentum underlying the SOL price trend is likely positive, supporting further gains in Solana.

The three EMAs could act as support in the event of a market correction.

Solana's correlation coefficient with bitcoin is 0.98 according to information from Macroaxis.com. Therefore, Solana's price trend is expected to follow bitcoin closely; A market correction in the latter could usher in a decline in SOL, and traders should consider this before increasing their positions in both assets.