Leo Sun, The Motley Fool

Sun, Jun 22, 2025, 2:36 PM5 min read

• Solana has underperformed Bitcoin over the past year.

• It faces a lot of competitive threats.

• It has catalysts on the horizon -- but it could struggle to stand out.

• 10 stocks we like better than Solana ›

Bitcoin's (CRYPTO: BTC) price surged about 60% over the past 12 months and trades about 7% below its all-time high. That rally was driven by an inflow of cash into its spot price ETFs, which started trading last year; more corporate and institutional purchases, and the Trump administration's crypto-friendly stance and establishment of a Strategic Bitcoin Reserve. Bitcoin could also be gaining more traction as a hedge against inflation, geopolitical conflicts, and other macro headwinds, while expectations for lower interest rates are driving investors toward the crypto market again.

Yet many of the smaller cryptocurrencies were left behind and underperformed Bitcoin. One of those tokens was Solana (CRYPTO: SOL), which only rose about 7% over the past 12 months and remains more than 50% below its all-time high. Let's see why Solana slipped -- and if it might be a better long-term investment than Bitcoin at these levels.

Solana, like Ether (CRYPTO: ETH), is staked on its blockchain (locked up for interest-like rewards) instead of mined. That proof of stake (PoS) mechanism consumes a lot less power than the proof of work (PoW) mechanism used to mine Bitcoin. PoS blockchains also support smart contracts, which are used to develop decentralized apps (dApps), games, non-fungible tokens (NFTs), and other crypto assets. PoW blockchains are only used for mining tokens and don't support those developer-oriented features.

Therefore, Solana and other PoS tokens are often valued by the speed of their transactions and the growth of their developer ecosystems instead of the scarcity of their tokens. Moreover, Solana is an inflationary token with no maximum supply. Nearly 528 million Solana tokens are currently in circulation, but it's reducing its annual inflation rate (currently at 4.5%) by 15% every "epoch year" (450 days to 630 days) until it reaches an annual inflation rate of 1.5%. Bitcoin is a deflationary cryptocurrency with a maximum supply of 21 million tokens, 19.9 million of which have already been mined. That scarcity makes Bitcoin more comparable to gold, silver, and other physical commodities.

Many PoS tokens were built on Ethereum's blockchain, but Solana has its own native PoS blockchain. Solana also upgraded that PoS blockchain with its proprietary proof-of-history (PoH) mechanism, which enables it to process transactions at a faster rate than Ethereum.