There’s no doubting that the altcoin sector has flourished in recent years, having a significant impact on the whole crypto market as a result. In fact, a brief look at data accessible on Google Trends reveals that searches for the word “Ethereum killer” have been increasing dramatically over the past 90 days, indicating a growing interest among investors in a variety of alternative cryptocurrencies like as bitcoin.
In this context, a number of cryptocurrencies, including Cardano (ADA), Solana (SOL), Polkadot’s DOT, and Terra (LUNA), have lately experienced significant growth in the market. A lot of people are talking about SOL right now, and it’s largely because of its most recent rise, which has seen the cryptocurrency surge despite the market facing a big selloff.
Aside from that, there are a number of other networks that have showed considerable promise. For example, following the successful completion of its much-hyped Alonzo hard fork, Cardano has also been able to generate significant profits, posting gains of +70 percent and 1,200 percent over the course of the previous 90 and 180 days, respectively.
The demand for next-generation tokens is on the rise. soars
Cointelegraph reached out to Antoni Trenchev, managing partner and co-founder of lending platform Nexo, to get a better understanding of what the aforementioned changes signify for the market as a whole. According to him, there is increasing institutional demand for coins such as Solana’s SOL and Terra’s LUNA, as evidenced by the fact that both assets have been able to make their way into the list of the top 15 cryptocurrencies in terms of total market capitalization. Trenchev stated in an interview with Cointelegraph:
“This is a reflection of firms investing more heavily in cryptocurrency.” During the first two months of 2021, big financial organizations such as BlackRock, Square, and MicroStrategy were just just putting their toes into the Bitcoin waters. Now that they’ve seen its benefits, they’re hoping to capitalize on the untapped potential of emerging blockchains and DeFi coins, which have the potential to provide bigger profits.”
It was noted by Trenchev that such developments suggest that the crypto market may be in the midst of an alt-season at the moment; however, what makes this time around different is that established coins such as ETH and Bitcoin (BTC) are demonstrating a higher level of stability in comparison to some of these newer assets. In his words, “consider of the current circumstance as alt season meeting institutional interest,” and “yeah, I believe we will see more and more patterns like this in the future.”
Because of Solana’s massive outage on September 16, the stock did not experience a panic-induced sell-off and instead lost less than 10% of its value, demonstrating the stability that these institutions provide investors.
Solana’s victory serves as a wake-up call to the market.
Earlier this month, institutional traders flocked to Solana as demand for exposure to cryptocurrencies like as Ether and Bitcoin (BTC) appeared to have peaked. In this sense, for the first week of September, SOL-centric investment products accounted for an incredible 86.6 percent of all weekly inflows into the cryptocurrency investment market.
More precisely, according to statistics recently made accessible by digital asset management firm CoinShares, SOL’s combined investment products saw inflows of more than $49.4 million between September 6 and September 10, according to CoinShares. Also noteworthy is the fact that SOL’s value increased by 275 percent week on week, accounting for 86.6 percent of the overall capital influx into the cryptocurrency investment industry.
Finallt, demand for other digital asset products has continued to outpace that of bitcoin products for the fourth consecutive week, with demand for different altcoins far outpacing that of bitcoin products, with the latter only seeing small inflows of $200,000 over the period. Examples include the fact that, during the first half of September, multi-asset products, such as XRP, Polkadot’s DOT, and Bitcoin Cash (BCH), were able to record significant financial inflows totaling fa$3.2 million, $3.1 million, $1.7 million, and $600,000 (in fa$).
Institutional interest is piqued by “undiscovered” ventures.
Cointelegraph spoke with Kadan Stadelmann, chief technology officer of Komodo, a supplier of end-to-end blockchain infrastructure solutions. Stadelmann explained that increasing demand for undiscovered projects is nothing new in the cryptocurrency market. However, what distinguishes this period from prior cycles is the massive quantity of capital that has poured into the market from financial institutions. He stated, “I’m not going to lie, I’m not going to lie.”
According to the report, “the concern is that this will result in faster market cycles for specific cryptocurrencies that are outliers from overall market movements.” Excessive fear of missing out (FOMO) and price hikes are followed by a massive sell-off and price falls. Prices for SOL, in particular, have dropped by 20 percent this week. That doesn’t exclude out a swift comeback to the all-time high levels in the future. However, those who are unfamiliar with cryptocurrency should be aware that volatility is standard operating procedure.”
Finally, Stadelmann feels that as we progress toward a more decentralized future, it will become more usual to see a dramatic surge in the price of various cryptocurrencies. This is in line with Trenchev’s belief that we are moving toward a more decentralized future. “There are hundreds of DeFi projects that are going under the radar….” Many of these projects have sound technology and can see their prices rise as soon as financial institutions see their potential,” he said.
The growth of alternative cryptocurrencies is understandable.
Because the Ethereum network is incapable of scaling, the surge in popularity of many of the altcoins listed above can be traced back to this lack of scaling capability. Accordingly, despite all of its recently highly publicized functional upgrades, the platform is only capable of processing approximately 15–25 transactions per second in its current condition — all while providing an incredibly low throughput capacity.
On top of that, the recently completed London hard fork was intended to help regulate Ether’s rising gas fees — after rates rose as high as $40 and $70 earlier this year during the first and second quarters, respectively — but the figure appears to be hovering around the $15–$20 range, which is quite high for the average Ethereum user.
Furthermore, during peak traffic hours, minting a nonfungible token (NFT) on the Ethereum network can cost up to 3 ETH, which, in many situations, can result in a price point that is higher than the real value of the nonfungible token itself. The Solana project, along with many other similar initiatives, not only provides faster transaction speeds, but also significantly cheaper gas prices, allowing for the more cost-effective issuing of NFTs.
With Ethereum preparing to make the switch to a proof-of-stake foundation, it is believed that the platform would be able to execute up to 100,000 transactions per second once the transition is complete, according to the latest estimates. While we await the arrival of that day, it appears as though a growing number of smart contract-enabled platforms will continue to eat away at Ethereum’s massive market share until then.
Is Ethereum on the approach of being eclipsed by another cryptocurrency?
A new transaction pricing mechanism for Ethereum was meant to be implemented as part of the all-important London hard split — which, incidentally, included critical updates such as the Ethereum Improvement Proposal 1559 — with the goal of bringing the ecosystem into a deflationary state.
According to the available data, over 336,000 ETH tokens have already been burned, with the current burn rate currently sitting at 4.9 ETH per second or approximately 2.7 million ETH tokens per year, which would effectively reduce the project’s annual supply growth rate to 2.3 percent while increasing its issuance to approximately 5.3 million tokens per year.
As a matter of fact, Ethereum is not the only project to employ a deflationary strategy, as Solana is also known to burn 50% of its transaction fees in order to control the supply of its native SOL token. Khalid Howladar, chairman of MRHB DeFi, a decentralized finance (DeFi) network that is Shariah-compliant, spoke with Cointelegraph about his company’s plans:
“While it is undeniable that Ethereum is the present smart contract backbone of the DeFi ecosystem, Solana is establishing itself as a strong contender with the potential for further growth in the near future.” Solana has emerged as a credible competitor to Ethereum’s position in the realms of programmable money (DeFi) and programmable media (NFTs) because to key features such as cost and speed.”
Considering that institutions are only just dipping their toes into the DeFi waters, Howladar believes that the next few months will be quite intriguing in terms of how they progress their involvement. If DeFi platforms can somehow secure basic things like consumer safety through decentralized KYC and AML, they will take significant market share away from banks, especially as peer-to-peer economic systems gain traction, according to Heinz, who believes that they will.
It will be intriguing to see whether Ethereum can retain its present levels of market domination in the coming years, particularly as a rising number of smart contract-enabled competitors continue to gain mainstream market momentum.