When it comes to investing, experts will always stress the importance of diversification, and that would apply to individual cryptocurrencies as well. While Bitcoin is certainly the biggest and most recognizable option when it comes to cryptocurrency, it’s not the only one available. “Altcoins”, like Solana, have their own benefits to offer, and are especially important for long-term investors. Cryptocurrency is still very new, and just because something was first doesn’t mean it will last forever. If there are any cryptocurrencies likely to someday dethrone Bitcoin, Solana is definitely a contender.
As with many other cryptocurrencies, you can invest Solana into an IRA and receive the tax advantages that come with that.
What is a Solana IRA?
Individual Retirement Accounts (IRAs) have been around since long before cryptocurrency. Most people are probably somewhat familiar with IRAs and may have contributed to one in order to save up for retirement. People primarily use IRAs for the tax advantages they offer, but through the decades IRAs have been available, not much has changed in the traditional IRA space. Today, though, people who are a little more forward-thinking have the ability to invest in cryptocurrency within an IRA.
A Solana IRA (or SOL IRA) is no different than a conventional IRA but instead of holding cash or securities like stocks and bonds, the account holds Solana cryptocurrency. IRAs that invest in cryptocurrency are self-directed IRAs (SDIRAs) as they give people choice in what their investments are.
Digital or cryptocurrency IRAs are not limited to a specific cryptocurrency, so with a crypto IRA you could invest directly in Solana tokens as well as any other of your favorite cryptocurrencies, including Bitcoin or Ethereum. You can see the full list of cryptocurrencies available through BitIRA here.
So if Solana is your cryptocurrency of choice, you may think about your self-directed IRA as a “Solana IRA”, but it could contain other cryptocurrencies too.
What is Solana?
Solana is a newer cryptocurrency with similarities to Ethereum. Because it is a “Proof-of-Stake” cryptocurrency, it uses far less energy to maintain the blockchain network than traditional “proof of work” cryptocurrencies like Bitcoin. Solana was launched in 2020 by Solana Labs and uses the abbreviation SOL.
Many cryptocurrencies have sought to improve upon the basic blockchain technology that Bitcoin had introduced to the world. While Proof-of-Stake was a major innovation for the technology, it didn’t end there. Blockchains like Solana have been created specifically to handle “smart contracts” and decentralized apps (dapps). This is some of the underlying infrastructure that supports non-fungible tokens, or NFTs.
Because of the additional features and abilities of the Solana blockchain, it is viewed as a cryptocurrency with high utility. Though utility doesn’t directly impact the price or longevity of the cryptocurrency, it does impact usage which will have an impact on demand and price.
What are the strengths of Solana?
Utility is one of the biggest advantages Solana has over other cryptocurrencies. Like Ethereum, the Solana blockchain allows for smart contracts and decentralized apps, making it a great network for developers who are looking to integrate blockchain technology in their apps, games and other projects. Because Solana is far more affordable than Ethereum, the transaction fees (or “gas fees”) are often much better, which makes the token and NFTs on its network much more accessible.
Solana also boasts a very strong and active community, largely fueled by the NFTs and dapps on its network. From its inception, Solana aimed to streamline user experience for its blockchain, and that combined with its affordable price and low transaction fees has helped Solana become one of the fastest growing cryptocurrencies on the market.
In 2021, Solana hit its all-time high price of $256.96. As the cryptocurrency market took a downturn, Solana too saw significant drops, particularly following the bankruptcy of FTX which held nearly $1 billion in SOL. It began trading over $100 again at the end of 2023.
What’s the future of Solana?
Solana is an interesting cryptocurrency to follow specifically because of the blockchain’s versatility. As blockchain technology innovates, Solana is in a strong position to make big moves too, unlike Bitcoin that is limited by its underlying technology. Though it had a rough time following the collapse of FTX and the general trust lost in cryptocurrency because of that, co-founder Anatoly Yakovenko remained optimistic during a DeFi conference hosted by Blockworks in 2023. At the conference, he discussed Solana’s commitment to the future and their roadmap for 2024 and beyond.
One of the biggest goals for Solana is ensuring even small validators on its network will have a fair shot at contributing to block production. This has caught the eye of Maker DAO, in particular. Solana also operates its own wallet platform, called Solflare, which has been continually updated to ensure the latest functionality is included. Currently, users are able to manage their SOL tokens as well as NFTs on the Solana blockchain through the Solflare wallet.
Bridges are also sure to be an important part of Solana’s future. A bridge allows for two different blockchain networks to communicate with each other in meaningful ways. This means Solana can use bridges to reach through to other blockchains for trading assets or managing smart contracts, effectively multiplying the network’s innate utility as a result.
Though the price of SOL took a huge dip along with many other cryptocurrencies during the latest bear market, it has since rebounded considerably and the Solana community seems enthusiastic about its future. Price predictions are very bullish for Solana as one of the favorite altcoins out there currently with a large community and lots of infrastructure already in place.