During Bull Markets in Crypto, smaller comparable projects often do better than bigger projects. There are a few reasons for this:
1. Small projects can grow faster. If a small company grows by $1 billion, it can double in size. But a big company needs a lot more money to grow by the same amount.
2. People get excited about new projects. They think these projects could be the next big thing, so they buy their tokens, making the prices go up a lot.
3. It's easier to change the price of a smaller token. You don't need as much money to buy it and make the price go up. ETH is 6x larger than SOL for comparison.
Relative Market Caps Chart
4. Small crypto projects are often more innovative, with fresh ideas and better product-market fit. They leverage superior technology and greater agility, attracting new investors. In contrast, older, larger projects tend to have more technical debt, making them slower to adapt to market conditions.
5. Investing in small projects can be riskier, but returns are far higher. Also, during Bull Runs, ie when the market is doing well, people are willing to take more risks.
ETH ETF POTENTIAL
Flow on Twitter conducted a scenario analysis to estimate the potential impact of the new Ethereum (ETH) spot ETFs on the price of ETH by the end of 2024. The analysis is based on predictions from various experts about the expected net inflows into the ETH ETFs.
Using the recent Bitcoin (BTC) spot ETF as a reference, the author assumed that every billion dollars in net inflows could move BTC by +2.7%. However, considering the differences between BTC and ETH, such as the fully diluted valuation, staking, and deflationary supply, the author assumed that ETH is 4x more reactive than BTC. This means that every billion dollars in net inflows could move ETH by +10.8%.
RISKS
There are some factors to consider, my main concerns are potential outflows from the Grayscale Ethereum Trust, the lack of staking for ETFs, and the potential challenges in conveying Ethereum's value proposition to retail investors compared to Bitcoin. Ie Bitcoin is Digital Gold! Ethereum is what again?
ETH ETF PROJECTIONS
Below are the Ethereum price expectations based on three different scenarios of money flow as a percentage of Bitcoin money flow.
Based on these assumptions, the author derived three scenarios for ETH's price by the end of 2024:
Bear case: ETH at $4,428
Base case: ETH at $5,294
Bull case: ETH at $6,730
Here's a quick table showing the number of Ethereum tokens based on current market cap and projected market cap. This forms the basis for my relative market cap calculations. If Ethereum hits the bull target of $808 billion, its market cap would be nearly 11 times larger than Solana's. This indicates significant potential for Solana to catch up.
My next step is to calculate the actual price targets for Solana based on the bear case, expected case, and bull case for Ethereum. Additionally, I'll calculate Solana's price targets at 20%, 30%, and 40% of Ethereum's market cap. This results in the following table:
The final step is the price predictions. I took the average of each scenario—the bear case, expected case, and bull case—to create the following table. Additionally, I calculated the relative returns on investments between Ethereum and Solana. This comparison demonstrates why I believe Solana, as the faster and smaller horse, deserves a larger allocation in my portfolio.
Using the invest answers Solana upside model, we can calculate where the price could go based on today's market cap of Ethereum, but with a higher percentage of Ethereum market cap, we get the following - not this assumes ETH price stays equal but SOL.DOM continues to grow:
Final note:
Why I think Solana is the faster horse: the table below speaks for itself. Solana is better, cheaper, faster, more active, and significantly more cost-effective on a market cap basis.