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Not all blockchains are created equal, and this bear market tested just how solid their respective foundations were. As it turns out, the difference between the best- and the worst-performers is impressive, and it gives food for thought.
Why did some cryptocurrencies tank, while others stayed above average ?
What does it say about their future potential and general crypto market trends?
We have taken a look at the biggest (>$1 bn market cap) native cryptocurrencies to try and find answers to these questions.
Bitcoin (-65% YOY) and Ethereum (-70% YOY) are still leaders in their respective categories: as a blockchain for a better money and as a smart contract platform, and they can be used as yardsticks to measure other coins’ performance.
On this graph the size of the coins represents their actual market cap, which gives a good understanding of just how important the leading coins are comparing to others. However, it makes it difficult to see the smaller ones, so it will be better to look at a smaller scale.
As a group, this part of the crypto market fared a bit better than smart contract platforms, and not only thanks to the unwavering support of Bitcoin bulls.
? Both Litecoin ($LTC -53% YOY), a 2011 Bitcoin fork with a x4 faster block creation, and Dogecoin ($DOGE -41% YOY) have lost less than Bitcoin. This is in part due to the fact that they both have raced less in the end of 2021, but also because of their respective communities, which maintain a rather stable demand. $DOGE has also reacted very enthusiastically to Elon Musk taking over Twitter: the “Dogefather” has on numerous occasions supported the memecoin, and the possibility of $DOGE playing some role in the future of the social network has injected hope into the community.
? Unlike these currencies, their later spun-offs did not manage to prove their worth just as well. Bitcoin Cash ($BCH -76%), a 2017 fork off Bitcoin also intended to improve its scalability, has been steadily losing ground. As to Shiba Inu ($SHIB -74%), a memecoin created with intention to repeat the Dogecoin’s success, its community proved much less committed. Both these coins now look like spun-off that have failed to make a difference.
? A coin that has proven to have a steady demand is Monero ($XMR -29%), a privacy-focused cryptocurrency with one of the best performance of this market cycle.
? Monero was equaled by only one emerging coin – the currency of The Open Network TON ($TON -29%). Previously called Telegram Open Network, this blockchain’s most valuable quality is its integration with Telegram, a messaging/social network app that has been rolling out different crypto services this year (read more on TON’s success here). Such integration now means more than any technical differences between blockchains, and TON creators understood it well.
? Quite surprisingly, the best-performing smart contract platform was TRON ($TRX -38%). This is partly because as an underdog Tron did not skyrocket as much as some other blockchains last year, but also due to its steady course on developing its web3 media specialization. Justin Sun’s previous acquisitions of Bittorrent, a distributed data storage service, and Steem, a web3 social media platform, could have also played a role in market confidence.
? The success of BNB Coin ($BNB -49% YOY), on the other hand, was largely expected. Powering the BNB Chain launched by Binance, $BNB price reflects the expectations of the immense network effect and synergy with the exchange giant and its numerous ventures.
⛏️ Ethereum Classic ($ETC – 50%), an almost-forgotten fork off Ethereum, has come to light during Ethereum’s Merge this year, mostly because it has kept its PoW consensus. As Ethereum miners left without job were considering switching their efforts to Ethereum Classic, the blockchain saw an uptick in interest. However, so far it still lacks any considerable progress.
? Polygon ($MATIC -54%), a layer-2 solution on Ethereum, which is slowly morphing into being a blockchain of its own, has performed well too. Acting as a “cheaper Ethereum”, it has attracted many DApp projects targeting retail public, and signed a number of high-profile partnerships (Starbucks, Reddit and Disney among others).
⚖️ While Stellar ($XLM -69%), a blockchain dedicated to payments, seems to have lost its momentum, Ripple ($XRP -54%), its biggest rival and the source of Stellar’s code, is breaking away, probably not least due to its recent interest in the web3 market. A conservative blockchain, primarily aiming at facilitating inter-bank transactions, Ripple started showing signs of change this year, announcing this summer The Open Metaverse project. It is also expected to come out victorious of its lengthy court trial vs the SEC.
⚛️ Finally, interoperability seems to still be popular as a concept, and Cosmos ($ATOM -64%) too managed to make the best-performers list.
? This crypto cycle’s biggest loser is undoubtedly Terra (RIP), which inherent architecture flaws have led to a spectacular crash and repercussion across the whole crypto space.
? Solana ($SOL -93% YOY), a PoS blockchain that saw a meteoric rise in the last three years, may very well take the second place. Positioned as “Ethereum-killer”, it offered higher scalability and cheaper transactions (although with occasional network halts), all while deploying significant efforts to attract developers and nurture all kinds of crypto projects.
Solana founders were good at marketing, but this may be exactly what scares the market now, raising a legitimate question: “Is there a real need for Solana or has its development been artificially pumped?” The FTX demise has only increased the doubts: the defunct exchange and SBF personally were highly involved in Solana’s development, which now causes it a great deal of reputational damage.
? As to The Internet Computer ($ICP -86% YOY), Avalanche ($AVAX -85% YOY) and Algorand ($ALGO -86%), these blockchains were hoping to establish themselves as better smart contract platforms, but weren’t able to produce any significant argument (yet?).
? Two blockchains on this list might have been victims of their sluggishness. Both Polkadot ($DOT – 81%) and Cardano ($ADA – 77%) are used to brandishing the importance of their scientific components, which would explain their lack of vitality. They both have taken over 5 years to release a platform ready for building DApps, and when they finally did, the market did not jump on them as they might have expected. All is not lost of course, but these blockchains are yet to gain developers’ interest and create their own living ecosystems.
As the crypto market is nearing its bottom (or has it already?), its players prepare to bet on altcoins, and analyzing their bear market behaviour can give some valuable clues. However, it is worth remembering that price is only one of the success indicators: the real tech advantage can take time to be felt, and the real product-market fit can take time to take shape.