Solana (SOL -6.91%) has easily been one of the top performing cryptos of the year. If you think Bitcoin is red hot at the moment, just consider Solana's remarkable performance: The crypto is up 70% over the past 30 days and more than 300% for the year. Solana now trades at about $41, roughly where it was when cryptocurrency exchange FTX imploded last November.

Solana's recent stellar performance has analysts trying to figure out how much higher this crypto might go. Some have suggested that Solana will eventually make a run at its all-time high of $260, which it reached back in 2021 during the peak of the last crypto bull market rally. From my perspective, two key things need to happen for that to occur.

Win back investor trust

First and foremost, Solana needs to win back investor trust. Due to the role that failed crypto exchange FTX (and former FTX Chief Executive Officer Sam Bankman-Fried) played in the rise of Solana, there is still quite a bit of uneasiness about this crypto. Complicating matters is the Securities and Exchange Commission (SEC), which suggested back in June that Solana might actually be an unregistered security. As a result, there is arguably more fear, uncertainty, and doubt hanging over Solana than many of its rivals.

A big point in Solana's favor, though, has been its ability to win over large institutional investors. CoinShares, which tracks the inflow and outflow of institutional funds into different cryptocurrencies, has found that there have been net inflows into Solana in 28 of 32 weeks this year. Even more impressive, Solana seems to be beating out Ethereum as the altcoin of choice of institutional investors. While Solana has been seeing net inflows, Ethereum has actually been seeing net outflows.

Displace Ethereum as the top blockchain

However, winning back investors is the easy part for Solana. The hard part is creating a world-class blockchain that can take on Ethereum. That was the initial promise of Solana back in 2021, when it was routinely being touted as an Ethereum killer. But that simply hasn't happened. Ethereum, with a $216 billion market cap, still dwarfs Solana, which has a $17 billion market cap.

Moreover, if you take a quick look at blockchain niches where Solana was supposed to challenge Ethereum, the numbers are disappointing. For example, within the world of non-fungible tokens (NFTs), Solana was supposed to overtake Ethereum. But the latest data from CryptoSlam shows that Ethereum is still doing six times more monthly NFT sales volume than Solana, and the figure is even higher when you add in the NFT sales volume from the Layer-2 blockchains reside on top of Ethereum.

But that doesn't mean that Solana won't eventually overtake Ethereum. After all, Solana has a new mobile crypto strategy that is trying to make Solana the world's first mobile-optimized blockchain. As part of this strategy, Solana recently released its first hardware product, the Saga crypto phone. If successful, continued hardware product launches on an annual basis could drive rapid growth.

Investment firm VanEck, which recently published a report suggesting that Solana might soar in value by more than 10,000% by 2030, says that Solana needs to develop a "killer app" capable of onboarding 100 million users. This could be a new payment app or a new social networking app.

In a world where ChatGPT was able to attract 100 million users in just two months, it's certainly not out of the range of possibility that Solana might be able to develop a similar type of killer app. But it's not very likely. When discussing Solana in its report, VanEck brought up the Infinite Monkey Theorem. The theorem says that an infinite number of monkeys, incessantly banging away on typewriters, will eventually be able to produce the complete works of William Shakespeare. In the case of Solana, an infinite number of developers banging away on their keyboards might be able to develop a killer app.

What is the probability of hitting 0?

Ultimately, thinking about Solana's future price requires thinking about probabilities. It's important to assign a range of probabilities to different outcomes to determine which scenario is most likely to happen next. For example, while there is a scenario where Solana increases in value by 10-fold and blows past $260, there's also a scenario where Solana collapses and falls all the way back to $10.

So keep your expectations for Solana in check. While it's quite likely that Solana will continue its recovery into 2024, especially if Bitcoin continues to rally, a lot needs to go right for Solana to make a realistic run at its all-time high of $260.