Solana Just Crashed 14%, and Now There's a New Reason to Buy It

Assets often reveal their character in a crisis. When everything's price is climbing, every investment looks good. The truth shows up when the stampede starts.

That's what happened on Oct. 10 during the crypto flash crash. Solana (CRYPTO: SOL) initially fell hard with the pack before rebounding on Oct. 11 to a loss of 14%. But the more important element is that it demonstrated some serious value along the way. Here's what happened, and why it's a new reason to buy this coin.

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When stress hits, throughput is key

For blockchains like Solana, a flash crash is an unplanned and unforeseen stress test, and there's simply no way to cheat.

Between Oct. 10 and 11, liquidations of leveraged positions surged to roughly $19 billion as some new tariff headlines hit risk assets and sparked a cascade of leverage violently unwinding in an uncontrolled fashion. Major cryptocurrencies slid, and many altcoins were obliterated, with prices crashing more than 70%.

But the important part for Solana is that while some other chains crashed under the load and went offline for hours, preventing all transactions during a terrifying time for investors, it didn't flinch. During the volatility window, Solana processed thousands of transactions per second (TPS) in real time, a level that few chains can approach today. No other large-cap cryptocurrency came remotely close to its load-bearing performance in the same period.

Crucially, fees did not blow out for regular users even during the moments of peak load on the network.

Real-time gauges showed Solana's fees staying in a low and narrow band relative to other smart contract chains, even as users opted to pay additional fees for the chain to gain higher priority for their transactions. Per the chain's configuration, that's exactly what you want to see in a rush. The network processes transactions to its basic capacity first. Then, if there's still more volume that needs processing, it opts for letting users pay for priority status.

But per the evidence, the situation here was that users were paying those additional (optional) priority fees in a panic, rather than because the network was actually at capacity.

Why should investors care that the chain bore the load with ease?

Running smoothly during a period of huge demand and not compromising on low costs at the same time are not trivial capabilities. They're the difference between a chain that developers pick for serious market infrastructure that needs to perform well during the worst periods, and one they avoid when things get busy. In other words, capacity plus low costs translates into durable user retention.

Solana just got a major confirmation of its market-leading status on those fronts, which is a brand new reason for investors to buy it rather than its competitors.

This episode supports the main investment thesis

Solana's core pitch to users and investors is that its chain offers high capacity, low fees, and fast finality for consumer apps and payments. The investment thesis for buying it is thus that capital will migrate to the network as a result of those capabilities.

Its performance during the Oct. 10 flash crash is proof that this pitch is underpinned by real technology with real value. Assuming that developers keep building where throughput is abundant and fees are low, Solana's odds of taking more market share in a handful of different segments are very high.

While no investment is without risk, it is pretty improbable that the chain will get its lunch eaten by new players on the scene with better throughput, faster transaction times, or lower fees. A lot of capital and effort are devoted to maintaining its leadership in those categories, and newcomers simply will not have the resources to operate at the same scale. Plus, Solana is already so fast and so cheap that it will be hard to impress potential users by undercutting it, as there's not much room to improve.

Therefore, the coin is more worth buying today than it was before the flash crash. Just make sure your portfolio is sufficiently diversified, because it can still be quite volatile even as its technology runs the chain steadily when under stress.

Alex Carchidi has positions in Solana. The Motley Fool has positions in and recommends Solana. The Motley Fool has a disclosure policy.