Crypto just finished a very busy week as the market experienced a price pullback after El Salvador’s historic adoption of Bitcoin, Cardano’s long-awaited Alonzo upgrade launched and Solana’s tear reached new heights. But as the dust settles from all the excitement, most of the market, Solana included, is in a downward trend — with a few notable exceptions.
Tokens like Polkadot, Cosmos and Avalanche were all up around 15% in the last 24 hours coming into the working week Asia time, according to CoinMarketCap. Algorand performed even better, gaining 23% over Sunday night to reach a new all-time high of US$2.52 this morning, though has since fallen away to trade around US$2.17 at press time.
With a recent successful non-fungible token launch and impressive transaction speeds, Solana — dubbed an “Ethereum killer” — only broke into the crypto top 10 in mid-August, reaching as high as sixth place and reaching an all-time high of US$214.96 earlier this month. The network also reached a significant milestone in staking a claim next to Ethereum as a serious contender in the NFT ecosystem, with an NFT from its “Degenerate Ape” series selling for 5980 SOL, or US$1.2 million over the weekend.
Despite the landmark, Solana’s price pulled back this weekend, bringing its historic run to an end, with it sliding back into seventh place on the top 10 list. Are investors looking for the next altcoin ready for its own breakout moment?
The Next Solana?
“What investors are probably a lot more conscious of is whenever you see sort of charts looking like [Solana’s], they think ‘I should stay mindful, take profits,”’ said Trent Barnes, principal of ZeroCap, a digital assets firm for private clients. “The very real possibility of that taking profits and then shifting it into other protocols as well is definitely a worthwhile strategy.”
Cardano’s recent Alonzo upgrade was significant as it brought smart contract capabilities and support for NFTs to the network, as well as an ERC-20 converter, allowing Ethereum tokens to run on the world’s third-largest network by market cap. Looking at some of these altcoins making ground today, they all seem to have something in common.
“In essence, they are all EVM compliant,” says Stefan Rust, CEO and founder of HydrogenX. “Which means that they are running the Ethereum Virtual Machines on top of their blockchains, which allows them to benefit from all the smart contracts that have been developed in the Ethereum world.”
Polkadot was founded in 2016 by Gavin Wood, a co-founder of Ethereum, and its native token DOT was one of the coins to be making significant gains today. The network was designed to allow different blockchains to transfer value in a trustless fashion while keeping their unique features on a single channel. Through its canary network Kusama, Polkadot has launched a series of parachain auctions in recent months to boost innovation and development in the industry.
The most recent auction was recently won by the KILT protocol, which is an open-source blockchain protocol for issuing self-sovereign, verifiable and anonymous credentials. More parachain auctions are to come.
Another token gaining ground was Algorand’s ALGO, jumping over 100% last month to hit US$2.47 late last week before reaching a new all-time high of US$2.49 earlier today. It has since dropped somewhat, trading at US$2.15 at press time. Algorand is an open-source public blockchain-based network which relied on a “pure proof of stake” consensus algorithm invented by its founder, MIT professor Silvio Micali.
Rust says the price movement some of these altcoins are experiencing should not be surprising, despite the market dominance of Bitcoin and Ethereum in particular.
“[Investment is] just moving across into [other] altcoins, the next layer blockchains — Ethereum is hugely clogged up,” he said. “If you look at all of these chains … [they’re] all doing super good, innovative stuff. However, if you look at their blockchain, they’re all going to be full. As the world goes token and more and more economies get into tokenomics, you’re going to see all of these blockchains fill up and not have the capacity.”
Despite these strong fundamentals in cases like these coins, sometimes it’s also just basic market psychology driving the market, particularly for newer investors. Barnes says a lot of newcomer investors might be attracted to lower-priced tokens, thinking it might be easier to gain many times’ return on a cheaper coin as seen with Dogecoin earlier in the year where it rose over 1,000% in roughly a month.
But not all low prices are equal; when looking to invest using this strategy, it’s important to also examine the coin’s market cap as well.
“When you’re looking at price — which can drive some participants that are just new to the market — I don’t think that necessarily paints a realistic picture of what’s possible,” Barnes said. “But it still drives a lot of capital towards those assets because there’s the view that it’s a lot easier for me to 100x this coin or 10x this coin because it’s only at this price versus taking a look at the market cap.”
That’s not all she wrote
Even among experts the dominance of Bitcoin and Ethereum is not necessarily set in stone. In a recent interview with Forkast.News, Michael B. Greenwald, director for digital asset education at Tiedemann Advisors and former U.S. Treasury attaché to Qatar and Kuwait, said that following El Salvador’s adoption of Bitcoin, other countries following suit is not a guarantee.
Bitcoin’s price volatility, as well as Ethereum’s plans to address environmental concerns and expanding use cases, means he is watching what central banks and governments are doing regarding adoption before just assuming they will all jump on board with Bitcoin.
“People will use Bitcoin and Ethereum and Cardano and others alongside stablecoins and the digital dollar or a digital euro for specific purposes,” he said. “Some may be for art, some may be for transacting for small businesses, but each of them will have a different purpose. And that’s how I see the evolution of this future global wallet evolving moving forward.”