294 Interactions, 4 today
Is it possible that the alternate season has arrived? ETH, DOGE, and other altcoins hit new highs as DeFi and Ethereum’s London hard fork pledge even more development.
Altcoins such as Ether (ETH), Dogecoin (DOGE), and Ethereum Classic (ETC) are spearheading a new alt season that seems to be off to a rousing start. Since a – wave normally raises all sails, many other cryptocurrencies are gaining from the increased interest in altcoins. Ether, on the other hand, may be the one causing the vibrations.
The price of the flagship altcoin, ETH, rose by more than 65 percent in 30 days, eventually breaking through the $3,500 barrier on May 6. This brings the token’s yearly returns to over 1,500 percent, when it was traded in the $215 range this time last year. Because of the price increase, the market capitalisation surpassed $400 billion for the first time.
Joshua Frank, CEO of The TIE, said the social media trends around Ether and what the cryptocurrency’s gains mean for altcoins. He answered: “Many investors consider Ethereum a proxy for the alt-coin market, and tweet volume continues to increase exponentially since July 2020. […] Tweet volume over 24 hours recorded an incredible 59,000 as Eth continues to push all-time highs.”
In percentage terms, Ethereum Classic — a continuation of the original Ethereum blockchain — has seen its value increase even more than the more popular coin of its sister blockchain. According to CoinGecko, ETC’s price gained nearly 400% in seven days to hit an all-time high of $167 on May 6. The Ethereum Classic blockchain sprang into existence after most developers migrated to the now more popular Ethereum blockchain following a hack on The DAO’s smart contracts in 2016, which cost the protocol $50 million in ETH.
In percentage terms, Ethereum Classic — a continuation of the original Ethereum blockchain — has seen its value rise even faster than its sister blockchain’s more popular coin. According to CoinGecko, the price of ETC increased nearly 400% in seven days, reaching an all-time high of $167 on May 6. Following a hack on The DAO’s smart contracts in 2016, which cost the protocol $50 million in ETH, most developers switched to the now-more common Ethereum blockchain, resulting in the development of the Ethereum Classic blockchain.
Bitcoin’s (BTC) supremacy has also decreased from the 70 percent level it was in at the start of the year. It has since fallen, hitting a year-to-date low of 45.70 percent on May 6. The domination index basically measures BTC’s market cap to the total market cap of all cryptocurrencies together.
When altcoins overtake the appetite of crypto buyers, BTC supremacy typically declines. The last time the index has ever been smaller than it is now was just before the cryptocurrency price crisis in 2018, when buyers were actively scrambling for alternatives to Bitcoin, which had fallen by more than 60% at the time.
The chief executive officer of cryptocurrency exchange Crypto.com, Eric Anziani, explained to Cointelegraph why he assumes Bitcoin’s domination is waning this time: “Price action moves in cyclical patterns because it reacts to investor psychology and dominant narratives in the space.” He went on to say:
“As the narrative around institutional adoption of Bitcoin has tapered off somewhat, investors have begun to turn to blockchains and protocols other than Bitcoin. […] Although Bitcoin is a very sound store-of-value, the market as a whole is realizing how pivotal altcoins and their respective projects are to the future of crypto.”
This shift in market conditions can also be seen in the derivatives markets. On May 5, the amount of Ether futures momentarily exceeded that of Bitcoin. Since peaking at 45 percent in mid-April, ETH futures premiums have stabilised at 25 percent.
This indicates that optimism is not nearly close to its peak despite ETH pushing to new highs on a daily basis, thus signaling that there is still room for growth when prices are compared with market sentiment.
London hard fork will lead to faster DeFi growth
The price of ether skyrocketed after the Ethereum blockchain was upgraded in Berlin on April 15. The hard fork included four Ethereum Improvement Proposals, which the developer community voted on. Two of these tackled gas prices for particular transaction forms, and although they lowered costs for others, they raised costs for “op-code transactions,” which could be used for denial-of-service attacks. The other two ideas broadened the scope of transaction theory.
“One of the nice effects of the Berlin hard fork was that gas prices for DEX aggregators became much cheaper,” James Beck, director of marketing and content at ConsenSys, a blockchain technology firm that supports Ethereum’s infrastructure, told Cointelegraph. For example, using MetaMask’s swap function now results in a 40,000 GWEI reduction while trading tokens.”
Ethereum is the most widely deployed blockchain in decentralised finance markets, and its price always correlates with DeFi’s development. At the time of publication, the gross valuation locked in DeFi had reached a record peak of slightly more than $82 billion. Since the beginning of the year, the TVL in DeFi has been steadily increasing, almost doubling since the beginning of February. Flora Sun, managing director of Binance X, the developer initiative of cryptocurrency exchange Binance, opined on the reason for this growth:
“There’s a lot of innovation in DeFi protocols these days. In the past, lending and DEX were the main DeFi protocols, but now starting with AMM, there are various types of DeFi that meet various needs, like vaults and insurances. DeFi still offers a much higher yield than traditional finance, so naturally, it is attracting a lot of crypto liquidity.”
AMMs, or automated market makers, are now an essential part of the DeFi ecosystem. An AMM, as the name implies, is an electronic trading model that decentralised exchanges use instead of conventional, centralised exchanges’ order books. When protocols use AMMs to supply liquidity pools, it ensures that the assets’ prices are decided by a fixed, predetermined mathematical formula depending on the supply of the two tokens involved in the trade/swap.
According to the first quarter DeFi survey from ConsenSys, only 1% of all Ethereum addresses are actually using DeFi platforms. As a result, the potential for adoption seems to be enormous as more investors seek to prioritise decentralisation in their portfolios. According to the survey, almost 51 percent of all payments charged in the first quarter of 2021 were on the Ethereum network, which is more than double that of the Bitcoin blockchain. Uniswap, a decentralised exchange, took about half the volume of payments taken by Bitcoin.
Additionally, another improvement proposal for Ethereum, EIP-1559, has been greenlit by the developer community as a part of the London hard fork that’s scheduled to happen in July. Anziani further spoke on the hard fork:
“This upgrade will begin burning transaction fees, naturally reducing Ethereum’s rate of inflation. If network usage is high enough, Ethereum may even become deflationary. This is a highly bullish development that the market has just begun to price in.”
Furthermore, Ether has shown a low degree of global leverage across exchanges, implying that ETH investors are trading in spot holdings rather than using leverage to long Ether. Frank speculated about what this might mean: “This indicates that holders intend to either hold Eth in their wallets and/or use Eth to interact in the eco-system with DeFi or other protocols rather than use leverage as a purely speculative play to profit.”
Other alts grow as well
Due to the rise of DeFi, alternate networks to Ethereum, such as Binance Smart Chain and Cardano, have seen expanded acceptance of DeFi protocols and decentralised apps as people aim to escape Ethereum’s high gas fees, which have become a problem for users everywhere. Since the gas-fee problem has persisted for some time, BSC and Cardano have accommodated some of 2021’s DeFi rise. Sun said on the subject:
“Since BSC launched in September 2020, in 8 months, there are 500+ projects building on BSC and its ATH daily transaction volume has exceeded Ethereum’s by 450% and currently boasts of $56 billion in its DeFi ecosystem. All the projects building on top of BSC contribute to this growth.”
Binance Coin (BNB), the native cryptocurrency of both Binance Smart Chain and Binance Chain, has also quickly risen from trading in the $50 range on Feb. 1 to reaching an all-time high of $679.82 on May 3. That is a growth of over 1,200% in less than 100 days, leading BNB to rise to become the third-biggest cryptocurrency by market capitalization. According to CoinMarketCap, the token has a market cap of nearly $100 billion as of the time of writing.
On May 7, Cardano’s native ADA coin reached a new all-time high of $1.70. Over the last year, the blockchain has risen by more than 3,200 percent. Cardano has also revealed a number of alliances and product releases in the last month. Despite this, Beck prefers layer-two alternatives to Cardano, stating, “More DeFi users will flock to Ethereum compatible Layer 2 networks.” DeFi developers want to switch their apps and customers to layer 2 to take advantage of lower gas prices.”
According to L2 Beat, the TVL in layer-two solutions has increased nearly twentyfold, from $38.4 million on Jan. 1 to around $718 million at the time of writing. It briefly even surpassed $1 billion in both March and April. Beck further stated:
“Synthetix and dYdX have announced they have been ardently working on integrating with Layer 2 solutions. Synthetix has been working with Optimism for months now, while dYdX recently announced that their new cross-margined perpetuals are live on Starkware’s STARK based roll-up solution. We expect this trend to accentuate for the rest of the year.”
Among the several coins seeing unprecedented gains —-aside from Ether and the native cryptocurrencies of Ethereum equivalents, the Shiba Inu-themed meme coin Dogecoin (DOGE) is gaining the most social media coverage. It’s gaining so much traction that it may serve as a leading indicator for alt season.
On April 12, the coin burst out of the $0.06–$0.07 range, reaching an all-time high of $0.69 on May 5. DOGE is actually traded at about $0.71 and has increased by more than 35,000 percent year on year. However, May 8 will be a pivotal day for DOGE, as Elon Musk’s presence on Saturday Night Live will determine what lies ahead for the coin and, potentially, affect this alleged alt season.