Two Bets at Once: A Simple Thought on Solana

The best crypto investments offer two ways to win.

My favorite crypto investments give me two ways to win. Take bitcoin, for instance.

When I buy bitcoin, I am making two bets:

1) The global “store of value” market will grow.

2) Bitcoin will take an increasing share of that market.

Only one of these things has to happen for me to do well.

Today, the store of value market is worth roughly $27.5 trillion: $25 trillion for gold and $2.5 trillion for bitcoin. (You could argue that other assets are also part of that market, like silver, art, Ethereum, and real estate, but for the purposes of this memo I’ll keep it simple.)

If the store of value market grows over time—let’s say it doubles from $27.5 trillion to $55 trillion—bitcoin will also double, as long as it keeps its current 9% market share.

Similarly, bitcoin’s price could double even if the store of value market is static, as long as it doubles its market share to 18%.

A mistake many investors make is focusing too much on bitcoin winning market share and too little on the growth of the market. The global store of value market has grown by 10x in the past 20 years, from less than $3 trillion in 2005 to $27.5 trillion today. All you need for bitcoin to 10x is for that to repeat. Seems feasible to me.

If bitcoin also gains market share, the upside compounds. If the market grows by 10x and bitcoin ends up matching gold (i.e., taking 50% of the market, which I’d argue is a reasonable scenario over the next 20 years), every bitcoin would be worth $6.5 million.

I’m not saying that will happen, but you can see why making two bets at once is so attractive.

What About Solana?

When I invest in Solana, I am also making two bets at once:

1) The stablecoin and tokenization infrastructure market will grow.

2) Solana will win an increasing share of that market.

Both seem like good bets to me.

The stablecoin and tokenization infrastructure market is currently served by a number of impressive Layer 1 blockchains. Ethereum is the market leader, with the largest share of stablecoin issuance and trading volume and a leading share of fund tokenization. Tron, Solana, and Binance Smart Chain are the top challengers in the stablecoin market. Together, these assets have a market cap of $768 billion.

While Solana is an important part of this market, it's relatively small at $107 billion, representing just 14% of the overall market. But that’s also what makes it a good candidate for both bets. 

I have a lot of confidence that the stablecoin and tokenization infrastructure market will grow. I think people significantly underestimate how much these technologies will remake markets. Over time, I suspect nearly all payments will be in stablecoins and nearly all assets will be tokenized. The blockchains that facilitate this growth will be extremely valuable. It’s easy to imagine this market growing by 10x or more.

I’m bullish on Ethereum and other blockchains, but I also like Solana’s odds of winning a larger share of this market. It offers fast, user-friendly technology, backed by a great community with a ship-fast attitude. It’s a newer asset and is playing catch-up against its peers in winning institutional mandates, but it’s gaining ground: Just this week, when Western Union announced it was building a stablecoin, it chose Solana as the underlying blockchain.

If I’m right, the combination of a growing market and a growing share of that market will be explosive for Solana. Just as with bitcoin.

It pays to approach the crypto market with humility. Even the most seasoned experts don’t know exactly how things will play out. But if you can stack the odds in your favor by getting two high-conviction bets for the price of one, it can be a nice place to be.

Risks and Important Information

No Advice on Investment; Risk of Loss: Prior to making any investment decision, each investor must undertake its own independent examination and investigation, including the merits and risks involved in an investment, and must base its investment decision—including a determination whether the investment would be a suitable investment for the investor—on such examination and investigation.

Crypto assets are digital representations of value that function as a medium of exchange, a unit of account, or a store of value, but they do not have legal tender status. Crypto assets are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not currently backed nor supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies, stocks, or bonds.

Trading in crypto assets comes with significant risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks and risk of losing principal or all of your investment. In addition, crypto asset markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing.

Crypto asset trading requires knowledge of crypto asset markets. In attempting to profit through crypto asset trading, you must compete with traders worldwide. You should have appropriate knowledge and experience before engaging in substantial crypto asset trading. Crypto asset trading can lead to large and immediate financial losses. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price.

The opinions expressed represent an assessment of the market environment at a specific time and are not intended to be a forecast of future events, or a guarantee of future results, and are subject to further discussion, completion and amendment. The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice, or investment recommendations. You should consult your accounting, legal, tax or other advisors about the matters discussed herein.