When examining the prices of cryptocurrencies, one must consider the trends that affect their value. For example, Solana has attracted numerous investors due to its high-performance blockchain model. However, questions surrounding its long-term scalability and various technical issues have impacted investor sentiment. By examining the dynamics which influence Solana price, investors can gain insight into the crypto market as a whole.

What Makes Solana Different?

Solana is distinguished by a Proof of History (PoH) mechanism that functions by timestamping transactions sent to the network. This innovative system verifies the order in which transactions are sent and tracks the time that has passed between them, enhancing efficiency and security.

This unique approach has several advantages over other crypto models, including higher information processing speeds and lower transaction fees—of course, these features have the added benefit of attracting developers and businesses seeking scalable solutions. Solana is one of the fastest in the market compared to other traditional blockchain models, making it a strong competitor in the crypto space. Its blockchain also supports several decentralized applications, such as non-fungible token (NFT) marketplaces and decentralized finance (DeFi) spaces.

Solana is especially popular in the NFT market, where several major projects thrive at the intersection of art and finance. Digital art spaces are constantly shifting and changing, making Solana’s popularity appealing to investors and specialized blockchain communities in these areas. The platform has demonstrated long-term potential for several digital assets, so why has it struggled to scale?

Addressing the Issue of Solana’s Network Outages

Despite the Solana blockchain’s apparent potential to scale, several prominent outages have hindered its progress. As a platform that supports several digital assets and their communities, downtime tends to negatively affect the entire operation.

Since 2021, at least nine partial or major outages have occurred, lasting anywhere from just over half an hour to nearly two and a half days at a time. Some of these issues had to do with Solana’s own systems, and others had to do with high network congestion. Nine outages over three years might not seem that bad, but it’s three times what Ethereum has reported over its nearly decade-long lifespan.

The frequency of these downtimes compared to other prominent cryptocurrency platforms has led users and investors to reexamine Solana’s credibility—and whether they want to adopt its platform as it is now.

The Visible Impact of Network Outages on the Price of Solana

Even during Solana’s shortest outage in 2021, which occurred on September 2, the cryptocurrency’s price dropped from a high of $131.96 the previous day to a low of $128.39. When another major outage occurred less than two weeks later, the price fell dramatically from a high of $174.93 to a low of $143.55. In a more recent outage on February 6, 2024, the Solana price dropped from a high of $97.79 to a low of $94.29.

While these price fluctuations ultimately only had a short-term effect, their relative consistency does little to inspire investor confidence and improve market perception. Following major network failures, it’s not certain that the coin will recover to new heights. This may cause investors to sell their tokens and create a cycle of price decline.

How Other Macroeconomic Factors May Impact the Price of Solana

In recent days, speculators have made several suggestions that could be promising for Solana’s price. Unlike the detrimental impact of network outages, speculation can be beneficial for cryptocurrencies. Reporter and analyst Crispus Nyaga observed a bright side to the current “crypto crash,” which has heavily impacted Solana’s market cap.

“The weekly chart shows that… Solana has been forming a cup-and-handle pattern, a bullish formation characterized by a rounded bottom, a horizontal resistance line, and a pullback,” Nyaga writes, “the top of the cup suggests an eventual surge to $505… The key caveat is that cup and handle patterns take time to complete.”

It’s certainly an area of speculation, but even the idea of a change in the price of a cryptocurrency has been known to drive investment. It remains to be seen whether this theory will form anything more substantial.

A Need for Change in the Short-Term

Solana and its investors can’t afford to rely solely on speculation to drive the price. Despite concerns over long-term scalability concerns, the blockchain continues to grow, demonstrating a legitimate belief in the platform’s value. Eliminating or mitigating network outages will help manage short-term price fluctuations and bolster the token’s potential as a long-term investment.

To establish itself as a top-tier blockchain, Solana must prioritize infrastructure improvements to ensure stability and efficiency. Investors will be looking for meaningful network upgrades and strategic developments to build confidence in the cryptocurrency’s future and determine whether Solana will overcome its growing pains to reach its full potential.