It's been a rough year for much of the world, but you wouldn't know it by looking at the financial markets. Despite the economic uncertainty, geopolitical instability and higher interest rates, many risk assets like stocks and crypto have been performing surprisingly well. Indeed, these typically risk-reducing conditions appear to have even illogically helped drive demand for famously volatile instruments like digital currencies. But as one might expect, some coins have fared much better than others.
The OG, Bitcoin, has gained a more-than-respectable 105% in the last 12 months, while Ethereum has risen around 63.5% over the same period. As impressive as these results might seem, though, they've got nothing on some of the most performant altcoins of 2023. Polkadot and Cardano, for instance, have managed to gain over 100% since October 2023. However, the undeniable top dog — with six-month gains of a whopping 650% — has been Solana. But what's propelling the fortunes of some altcoins, and why are others lagging behind? And what are the factors crypto investors should be watching for the rest of 2024?
What's the use?
In a trend that has been slowly developing since before the pandemic, the success (or lack thereof) of coins and tokens is becoming increasingly tied to their real-world utility over competitors. It's no surprise, then, that the above-mentioned altcoins are all major players in the smart contract, DeFi, and dApp spaces. And the best-performing of them all, Solana, is by far the fastest and cheapest for transactions.
Unlike its closest competitors — Cardano, Ethereum and Polkadot — Solana employs a special Hybrid consensus that merges features from the Proof-of-Work (PoW) and Proof-of-Stake (PoS) algorithms with its own unique Proof-of-History (PoH). This distinctive hybrid protocol enables it to reach speeds of 65,000 transactions per second (TPS), while Cardano and Polkadot average just 1,000 TPS by comparison. The original smart contract blockchain, Ethereum, can only manage a paltry 15-20 TPS, though the project's team has predicted that Ethereum 2.0 will hit 100,000 TPS in the next year.
Nevertheless, Solana Labs' value proposition goes well beyond mere transaction speeds. It's clearly headed by a forward-thinking team with big ambitions. The upcoming release of its much-hyped Beta Gameshift product, which promises to unite blockchain with the immersive experience of Web3 gameplay in the form of a user-ready API, is proof of exactly that. In fact, if anticipation around Gameshift can bring about a full-on bull run, Analytics Insights predicts that SOL could hit $200 by the year's end.
With legacy coins such as Bitcoin and Ethereum, the risk of large coinholders moving the market significantly in a short period of time is much lower now than in the early days of crypto. However, for up-and-coming projects like Solana, whales can still have a huge impact on price movements. And while we've already mentioned Solana's more than six-fold price increase over as many months, it has actually fallen nearly 30% since December. Some analysts have posited that this could be due to a 'pump and dump' routine by the leading figures of a major firm whose integrity has already been called into question once.
It's well known that FTX owns over 55 million SOL, which is worth almost $5.5 billion right now. And as Solana's value has risen over this year, so, too, have the number of bankruptcy claims being made against Sam Bankman Fried's ill-fated exchange. Now, luckily for Solana holders everywhere, around three-quarters of FTX's tokens are locked up. But this won't be the case forever.
Back in November, FTX unstaked 1.6 million tokens in a move that rocked the market. With so many people owed large sums by the FTX estate and debt claims soaring, there will continue to be a huge spectre hanging over SOL until FTX has sold its massive holding. This is likely to be a factor that will restrain growth in the medium term. Ethereum, on the other hand, doesn't have anywhere near the same susceptibility to thrashing whales overturning its boat. And if the promises of Ethereum 2.0 in terms of transaction speeds prove true, 2024 could be a good year for Ether, too.
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