The S&P 500(SNPINDEX: ^GSPC) market index has seen a total return of 25% in 2024. That's a great year for the stock market, but it can't hold a candle to the crypto market.
According to CoinMarketCap, the market value of all digital currencies added up to $1.65 trillion at the end of 2023. The combined market cap is up to $3.30 trillion as of December 19, which works out to double in less than 12 months.
A crypto pioneer Bitcoin(CRYPTO: BTC) has gained 138% over the same period. Smart contracts a pioneer Solana(CRYPTO: SOL) showing an increase of 101%, slightly ahead of the crypto sector as a whole.
But the picture changes if you zoom out a bit. Starting from December 2022 drums, Solana stands head and shoulders above Bitcoin and the stock market with a price gain of 2,000%:
So Solana has a recent history of outperforming Bitcoin, even though the larger cryptocurrency has enjoyed some pretty great gains in the same period. It would be pretty amazing if that two-year trend could continue into 2025 and beyond.
Is this a good time to rebalance your crypto holdings, backing Bitcoin to buy more Solana instead?
First, let me point out that Solana's recent price surge started from a very low point.
Caught in the financial meltdown of Sam Bankman-Fried's FTX crypto exchange, Solana had recently plummeted from $259 to $10 per token in about a year.
It's not easy to recover from a drop of that magnitude, but it's still a simpler task than venting from a higher starting point. Bitcoin also suffered from the FTX debaclebut his price drop was much less than Solana's. In other words, Solana's stellar returns from the summer of 2022 were aided by an artificially low starting price.
On the surface, Solana is about to perform. The digital currency is still a top performer when it comes to quick execution of smart contracts, which is good for automating financial transactions and other asset-based changes.
In particular, Solana's fast contracts are useful when you are managing a large number of these decentralized programs at the same time in a time-pressured situation. Mobile games come to mind, alongside blockchain-based trading platforms and non-fungible token (NFT) sales. Someday, you might even buy gum and gas with a quick Solana transaction. That's the kind of thing digital currencies with smart contracts and fast transaction settlement can do.
Therefore, Solana's return to the top 10 list of major and popular cryptocurrencies makes sense. Owning Solana is probably a good idea in 2024, as it looks like the token will be widely used in real-world applications over the next few years.
But can Solana outperform Bitcoin at this point? Maybe, but I'm not so sure. Bitcoin has too many growth catalysts going on:
Bitcoin recently updated its economic function for the fourth time, halving the amount of coins issued when a new block of Bitcoin transaction data is processed. Historically these halves have led to impressive price gains a year or so later, and there's no reason to believe this cycle will be any different.
Exchange-traded funds (ETFs) are based on up-to-the-minute Bitcoin prices that are about a year old. Their presentation was expected to bring a lot of new capital to the crypto market, using tools already familiar to any stock investor. About 5.2% of all Bitcoins have found their way into spot Bitcoin ETFs so far, led by the huge iShares Bitcoin Trust(NASDAQ: IBIT). Capital inflows picked up pace in November, although disappointing economic reports this week led to the largest one-day outflow to date. Even Bitcoin and its ETFs are still quite volatile.
November's Bitcoin enthusiasm was attributed to the election results. The incoming Trump administration is bringing a more crypto-friendly approach to the Capitol and the White House, and the president-elect included cryptocurrency support in his campaign. Among other things, this change in the regime could lead to the creation of a national Bitcoin reserve, which would boost the price of the cryptocurrency by making it even more scarce on the open market.
I could go on, boring you to tears with technical data and promising market trends, but you get the idea: Bitcoin is not standing still. Solana will need to work hard to beat this behemoth in the long run.
It may sound funny, given Bitcoin's long history of wild price swings and constant volatility, but the digital gold is evolving into a solid asset that holds value. There are no “safe bets” in the crypto market, but Bitcoin comes pretty close. A sudden turn of events could turn Solana into a footnote in crypto history, but it takes a massive sea change to make Bitcoin obsolete.
As a long-term investor, I would rather have a large Bitcoin holding and a smaller, speculative Solana investment than the other way around. To be clear, I own a bit of both. Still, future Bitcoin price trends will make a much bigger difference to my nest egg than Solana ever could.
And that's the way I like it. Your mileage may vary, but Bitcoin looks like the stronger investment idea to me.
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Anders Bylund He has positions in Bitcoin and Solana. The Motley Fool has posts on and recommends Bitcoin and Solana. The Motley Fool has a disclosure policy.
