For investors living on the cutting edge of the digital economy, bitcoin is starting to look old-fashioned in a way.
Focused on high returns and profits, Reuters argues, some of them are moving away from the cryptocurrency that “started it all” and was designed as an alternative to regular cash, in favor of some of its descendants, which have been created as native tokens (tokens) of blockchain platforms that host smart contracts (smart contracts) and applications (apps).
MarketVector’s Smart Contract Leaders Index, which tracks the most important tokens of its kind – including ether, dot and solana – is up 36% in 2023, even outpacing bitcoin’s 33% rise. Solana’s token value has increased by 76% this year.
Bundeep Rangar, CEO of Finegia, a crypto-asset management company, recently said that he expects the biggest returns to come from smart contract tokens on platforms that support decentralized finance (DeFi) applications. Some investors from the $1 trillion world of digital assets seem to agree with Bundeep Rangar’s position. Data from CoinShares shows ether- and solana-based investment products seeing even small inflows when bitcoin products suffered outflows (eg withdrawals) for four consecutive weeks.
About seven of the twenty largest crypto-assets are smart contract tokens, including ether, dot, solana, and cardano. BofA analysts, as well as Finegia’s Bundeep Rangar, point to smart contract tokens and blockchain-based applications working in a similar way to “growth stocks” in the world of traditional investors, which are typically tech stocks.
We expect 2023 to be the year of (positive) divergence for the value of tokens,” Bank of America analysts wrote in a research note on February 24 (a divergence occurs when an asset’s price moves in the opposite direction of a technical indicator , like an oscillator, or moves against other data). Bitcoin has long been traded in conjunction with tech stocks, but that thread may fray as smart contract tokens increasingly take over the mantle of crypto super-growth.
The 30-day correlation of the cryptocurrency bitcoin with the Nasdaq index turned negative for the first time on February 23 after almost three months (until then they had a parallel course). Some analysts and cryptocurrency market watchers argue that the relative resilience shown by smart contract tokens this year points to the steady performance of more established DeFi protocols despite what happened to the market in 2022.
They warn, however, that the global macroeconomic outlook and political of central banks could affect the development of various crypto projects and their related tokens. James Butterfill, chief researcher at CoinShares warned that it is still too early to talk about a significant (positive) divergence in cryptocurrencies.
Indeed, bitcoin’s shadow still looms over the industry, with its share of the total cryptocurrency market capitalization rising slightly to 40%, from 38% at the start of the year.
On the other hand, James Butterfill said that these could be signs of a recovery in the cryptocurrency market. “We should increasingly take the view that the market, as it evolves, will become more sophisticated and mature,
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