“Ethereum Killers” Solana, Terra and Avalanche were killed in January

"Ethereum Killers" Solana, Terra and Avalanche were killed in January

In short

  • Ethereum killers are blockchain networks that use smart contracts to enable DeFi, NFT, and other applications.
  • They were among the biggest losers in January’s crypto crash.

January was brutal for Bitcoin, with prices down 20% since the start of the month. But as bad as it was for BTC, things got much worse for the other top 15 cryptocurrencies by market capitalization, especially the “Ethereum killers”.

In January, Solana lost 42% of its value against the US dollar, Terra is down 40% and avalanche was buried by a 36% fall. Lower on the table, Algorand worth 43% less since the beginning of the year. Closer to the top, gimbal decreased by 20%, while Peas managed to look good, having only lost 27% – about the same percentage drop as Ethereum himself.

So-called Ethereum killers are blockchains that aim to look like Ethereum – decentralized networks that host applications and use smart contracts to automate functions – but are generally faster and cheaper to use.

With Ethereum-based innovations such as decentralized finance (Challenge), NFT, and blockchain-based games have become fashionable over the past 18 months, there is growing competition for users. Since new networks cannot match Ethereum’s traction with users, they compete with their technology. Most use proof-of-stake models, with the result that transactions are completed faster and much cheaper than they typically would be on Ethereum, which has struggled with network congestion.

And in 2021, the model looked really good.

Solana, for example, ended 2020 with a daily trading volume of $26 million and a price of $1.84, according to data from CoinMarketCap. But it closed 2021 with a volume of $1 billion and a price of $178.52. Over the same period, the amount of SOL tied to the network’s DeFi protocols – including exchanges, derivatives markets and staking services – has grown from nothing to almost 65 million coins (worth over of $11 billion), according to the DeFi Llama tally.

Avalanche gained momentum in the second half of 2021, with the price increasing tenfold from $11.13 on July 1 to $114.16 on December 31. Terra charted a similar course, rising from $5.73 to $91.36 from Q3 to Q4.

Much of those gains have been wiped out. Solana is back below $100, Terra is hovering midway through $51, and Avalanche is in between at $70.

Although most of the crypto’s focus remains on Bitcoin’s price movement, thanks to its dominance in the market, it managed to keep its losses to just under 20% after a decent weekend. Although it was still the worst January since 2018, around the start of what is now called “Crypto Winter”.

However, the markets are showing signs of recovery from the crash. In addition to bullish price data for major coins, investor demand is also up slightly, at least for Bitcoin. According to asset management firm CoinShares, there have been cumulative inflows into digital asset investments (such as the Grayscale Bitcoin Trust and ProShares Bitcoin Futures ETF) for each of the last two weeks.

This does not yet extend to Ethereum, Solana or other assets tracked by CoinShares. Nearly $27 million exited ETH investment products last week, with another $5.3 million and $2.3 million leaving Polkadot and Solana respectively.

The January killer continues.

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