January was brutal for bitcoin (BTC) as prices have dropped 20% since the start of the month. But just as bad as bitcoin performed was that of other cryptocurrencies in the top 15 by market cap, particularly for “Ethereum killers”.
In January, solana (SOL) lost 42% of its dollar value, land (LUNA) was down 40% and avalanche (AVAX) was buried by a 36% drop. The worst performing token was algorand (ALGO), which is worth 43% less than at the start of the year.
Near the top, cardano (ADA) is down 20% while polkadot (DOT) managed to do well, having lost only 27% – almost the same drop suffered by ether (ETH) itself.
So-called “Ethereum Killers” are blockchains that aim to be like Ethereum – decentralized networks that host applications and use standalone contracts to automate functions – but which are generally faster and less expensive to use.
With innovations developed on Ethereum, such as Decentralized Finance (or DeFi, for short in English), non-fungible tokens (or NFTs) and blockchain-based games have become more popular in the last 18 months, there is growing competition for users.
Since newer networks cannot match the adherence of Ethereum users, they compete with their technology.
Most networks use proof-of-stake (or PoS) models and, as a consequence, transactions are completed much faster and at a much lower price than they would usually be completed on Ethereum, which suffers from network congestion.
And in 2021, the model looked pretty good.
Solana, Avalanche and Terra
Solana, for example, ended 2020 with $26 million in daily volume and a price of $1.84, according to website data. CoinMarketCap. But it ended 2021 with $1 billion in volume and a price of $178.52.
During the same period, the amount of SOL tokens connected to the network’s DeFi protocols (including exchanges, derivatives markets and staking services) soared from zero to nearly 65 million coins (equivalent to more than $11 billion), according to The DeFi Calls.
Avalanche got a boost in the second half of 2021 as its price jumped tenfold, from $11.13 on July 1st to $114.16 on December 13th. Terra followed a very similar path, going from $5.73 to $91.36 from Q3 to Q4.
Much of those gains have been erased. Solana is down below $100, Terra is trading at $51 and Avalanche is among them at $70.
Despite much of the crypto industry’s attention being on bitcoin’s price movement (thanks to its market dominance), it managed to keep its losses below 20% after a decent end to the week.
Even so, it was the worst January since 2017, ushering in what is now called the “crypto winter.”
However, markets are showing signs of recovering from the slump. In addition to the bullish price data for major coins, investor demand has also picked up a bit – at least for bitcoin.
According to asset management firm CoinShares, there were cumulative inflows to investments in digital assets (such as Grayscale’s Bitcoin Trust and ProShares’ Bitcoin Futures ETF) in last two weeks.
This does not apply to ether, solana or other assets tracked by CoinShares. Nearly $27 million came out of ether investment products last week and another $5.3 million and $2.3 million left Polkadot and Solana, respectively.
The January “killing” continues.
*Translated and edited by Daniela Pereira do Nascimento with permission from Decrypt.co.