This Venture Capitalist Thinks Solana Will Surpass Ethereum During the Next Bull Market Cycle. Here's Why He's Wrong.

Kyle Samani, co-founder of Multicoin Capital and an early Solana (CRYPTO: SOL) backer, made a bold prediction in a September interview with Cointelegraph. He believes that Solana will flip Ethereum (CRYPTO: ETH), meaning pass it in market cap, during this market cycle.

Ethereum was the first major blockchain with smart contract capabilities, but Samani says that today no one really uses it, and that the blockchain network remains on top only because of its stablecoin supply. He expects crypto companies to switch to Solana because it's the most functional network.

I'm bullish on Solana, too, but I believe the odds of this prediction happening are slim.

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The size difference is massive

A quick look at the numbers shows why Solana flipping Ethereum is so unlikely. Ethereum has a market cap of about $288 billion as of Oct. 24. Solana has a market cap of about $60 billion. For Solana to pass the second-largest cryptocurrency, it needs to rise roughly 4.8x relative to Ethereum.

Recent price action for these two cryptocurrencies doesn't indicate that Solana will do that. Over the last year, Solana has declined by 46% and Ethereum by 38%. Solana has done better over the last six months with returns of 19% compared to just 2% for Ethereum. Solana tends to deliver bigger returns during bull markets, but it also falls harder during bear markets, in part because it's a much smaller cryptocurrency.

Rapid growth becomes more challenging the larger a cryptocurrency gets. There's a good chance Solana will outperform Ethereum in the next bull market, but it probably won't add hundreds of billions of dollars to its market cap.

Samani's case for Solana

Samani's argument rests on Solana being the far more useful blockchain network than Ethereum, so companies will opt to consolidate their operations onto it. Indeed, in terms of performance, Solana clearly outdoes Ethereum. Solana regularly processes over 1,000 transactions per second (tps) with transaction fees costing a fraction of a cent. Ethereum generally processes 15-30 TPS, and the average transaction fee is about $0.15.

Solana is also making more from fees. It generated $26 million in fee revenue over the last 30 days, ranking first among blockchain networks, according to data from DefiLlama. Ethereum came in third with $17 million.

Ethereum still leads in several categories

Although Solana ranked first in fees, Ethereum is the leading blockchain in other categories, and by a much wider margin. It has $49 billion of total value locked (TVL) into its DeFi smart contracts, per DefiLlama. Solana is fourth with $6 billion of TVL. It's also No. 1 for stablecoins, with a total stablecoin market cap of $144 billion, compared to $16 billion for Solana.

Samani said that Ethereum is only a leading blockchain because of stablecoins, but this isn't entirely accurate, considering it also has the most TVL. It also ignores the fact that being the stablecoin leader is a strength, not a weakness. Stablecoins are one of the best real-world uses for blockchain technology, and many financial institutions are experimenting with them, including JPMorgan Chase. Being the most common settlement layer for stablecoins only adds to Ethereum's value.

Both cryptocurrencies have their strengths, and if Solana performs well, it could gradually close the gap with Ethereum. But there have been supposed "Ethereum killers" for years, and none of them have pulled it off so far -- it has been the second-largest cryptocurrency for most of the last decade. I wouldn't expect that to change anytime soon, and especially not during this market cycle.

JPMorgan Chase is an advertising partner of Motley Fool Money. Lyle Daly has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum, JPMorgan Chase, and Solana. The Motley Fool has a disclosure policy.